Risk appetite rises

The Opening Bell: Where currencies start on Monday, January 25, 2016

Currencies

The Opening Bell: Where currencies start on Monday, January 25, 2016

25th Jan 16, 8:58am by Dan Bell

The NZDUSD opens at 0.6480 (mid-rate) this morning.

Risk appetite continued throughout Friday, sparked by ECB President Draghi’s comments that further stimulus measures could be implemented in March to boost European growth, and a strong recovery in oil prices as traders took advantage of 12yr lows.

Euro-zone private sector growth fell short of market expectations printing at an 11-month low in January. The report showed manufacturing and services fell to 53.5 in January from 54.3 in December, economists had expected a modest fall to 54.2.

U.S. existing home sales climbed 14.7% to an annual rate of 5.46 million in December, from a rate of 4.76 million in November, economists had expected sales to rise to 5.21 million.

The highlight of week will be Thursday’s FOMC statement, followed by the RBNZ rate announcement, with RBNZ Gov Wheeler widely expected to leave the OCR unchanged.

Global equity markets closed out the week broadly higher - Dow +1.33%, S&P 500 +2.03%, FTSE +2.19%, DAX +1.99%, CAC +3.10%, Nikkei +5.88%, Shanghai +1.25%.

Gold prices were flat on Friday closing out the week at $1098 an ounce, WTI Crude Oil continued to rocket higher on Friday surging 8% to close out the week at $32.19 a barrel .

Current indicative rates:

NZDUSD 0.6480 -0.3%
NZDEUR 0.6000 0.5%
NZDGBP 0.4540 -0.8%
NZDJPY 76.90 0.6%
NZDAUD 0.9260 -0.4%
NZDCAD 0.9180 -1.2%

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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here »

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Source: RBNZ

Source: CoinDesk

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1 Comments

by Stephen Hulme | 25th Jan 16, 9:50am 1453668630

Risk appetite continued throughout Friday, sparked by ECB President Draghi’s comments that further stimulus measures could be implemented in March to boost European growth,...

Yeah right!!!!

The ECB announcement from January 22, 2015, leaves no doubt:

The Governing Council took this decision in a situation in which most indicators of actual and expected inflation in the euro area had drifted towards their historical lows. As potential second-round effects on wage and price-setting threatened to adversely affect medium-term price developments, this situation required a forceful monetary policy response.

Asset purchases provide monetary stimulus to the economy in a context where key ECB interest rates are at their lower bound. They further ease monetary and financial conditions, making access to finance cheaper for firms and households. This tends to support investment and consumption, and ultimately contributes to a return of inflation rates towards 2%. [emphasis added]

The last sentence of the first paragraph quoted above proclaims exactly as I have described, “a forceful monetary policy response.” Though the program did not start actual purchases until last March, the CPBB3 (covered bonds) had already “bought” €37.2 billion by this announcement. There were also indications that the financial markets in Europe were gearing up for the endeavor, with lending to non-bank financial firms just surging in December 2014 as financial firms loaded up to front the ease of central bank premium buying.

Unfortunately, so ends our detection of QE in Europe. If it ultimately contributes toward the ECB’s goal of 2% inflation, it just cannot be found a year later. Economists and policymakers may be quick to dismiss that elongated separation as the beguiling work of oil prices, but again QE is supposed to be “forceful”; an effort so enormous and powerful that it shall overcome all impediments no matter how nefarious or stubborn. That is how central bankers who use it make it sound at least when it starts, that nothing can stop monetary policy when Q meets up with E. Read more