Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news the oil price slumped under US$100 a barrel and commodity prices generally fell around 7%.
The move happened in tandem with a slump in the Euro by 4 USc to US$1.45 after the European Central Bank (ECB) left rates on hold at 1.25% and suggested it would not raise rates until June at the earliest. See more here at Bloomberg on the euro's biggest fall in 8 months.
Markets had expected an earlier European rate hike, which had increased the attractiveness of the euro in recen months vs the US dollar, where the US Federal Reserve is expected to keep interest rates at 0% until next year. But the softening of the ECB's rhetoric overnight weakens the euro's attractiveness for investors relative to the US dollar. See more here at BBC.
Weak German factory orders also helped depress the euro and weaken expectations for a rise in European interest rates any time soon. Portugal also announced that its recession would deepen further after the bailout announced this week. Many countries on the fringes of the euro zone are very concerned about the effects of ECB hikes on their economies and precarious sovereign debt situations. See more here at Bloomberg on Portugal's economic forecast downgrade.
Commodity prices in US$ terms have moved in almost exact reverse to the US dollar in recent months as investors have sought inflation protection in hard assets. The surge in the US dollar overnight was matched by a slump in the price of oil, gold and other commodities. The gold price crashed another US$42/oz to US$1472/oz. See more here at Bloomberg.
Weak US jobs figures overnight also hurt sentiment on stock markets, where the S&P 500 and the Dow were down around 1% in late trade. See more here at Bloomberg on the weak jobless claim figures. Even more closely watched jobs figures are due tonight.
Commodity-linked currencies such as the New Zealand dollar, the Australian dollar and the Canadian dollar all fell in line with commodity prices.
The New Zealand dollar fell to 78.3 USc and has fallen from 81 USc in the last week. See our interactive chart below.
Our calculations at Interest.co.nz of the possible effect on the petrol price of the drop in the oil price in the last week and the offsetting effect of a drop in the New Zealand dollar vs the US dollar is for a fall in the price to around NZ$2.10/ltr for regular from NZ$2.21.9c a litre in mid-week.
There is an automatic stabilser effect in the falls in both the US$ oil price and the New Zealand dollar vs the US dollar, but the oil price move in the last week outweighs the New Zealand dollar fall.
This assumes other factors such as taxes and oil company margins are unchanged. See our interactive chart on petrol prices and its component parts here.
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