Today marks the 10-year anniversary of the beginning of the GFC, when BNP Paribas froze funds exposed to US sub-prime mortgages as they became impossible to value. Financial markets today couldn’t be further from the GFC period, with most assets richly priced and incredibly low market volatility. Even the threat of a major military catastrophe on the Korean peninsula barely gets the market’s attention these days.
With nothing much else going on – certainly no economic data worth noting – all the news was focused on Trump’s escalated warning to North Korea of “…fire, fury and, frankly, power the likes of which this world has never seen before”, late in the New York session yesterday. This was followed by North Korean threats of firing missiles over Guam. Trump has returned to Twitter, firing off a few more barbs, while his administration has tried to offer more soothing words.
A risk-off tone has pervaded markets, but moves haven’t been particularly significant under the circumstances. The Swiss franc leads the charge, with USD/CHF down 1%, gold is up 1.4%, the VIX index is up 11% to 12, global bond yields are slightly lower and global equity markets are modestly weaker.
The NZD has traded in a tight 25 pip range and is flat at 0.7330, outperforming its commodity currency counterparts. This reflects selling earlier in the week ahead of this morning’s Monetary Policy Statement, as lazy longs took profit ahead of the announcement. There was some reluctance to take the NZD down any further even with the US-North Korea sabre-rattling in the background. And with AUD/NZD stretching up to 1.08, that level was good enough for investors to take profit on that trade. In reverse terms, NZD/AUD is back up to 0.93 after stretching as low as 0.9255 yesterday.
Safe-haven flows saw a move into Yen. USD/JPY got down as low as 109.56 and currently trades down only 0.4% for the session around 109.85. However, yen outperformance sees NZD/JPY down to 80.5, some 4% below the 83.9 peak two weeks ago. EUR and GBP are flat for the day, as are NZD/EUR and NZD/GBP crosses.
Get our daily currency email by signing up here:
Daily exchange rates
Select chart tabs
BNZ Markets research is available here.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.