NZDUSD 0.6616 0.1%
NZDEUR 0.5891 0.3%
NZDGBP 0.5214 0.2%
NZDJPY 71.72 0.3%
NZDAUD 0.9489 0.4%
NZDCAD 0.8878 0.2%
GBPNZD 1.9178 -0.2%
It has been a busy 24 hours, with the net result being the Kiwi relatively unchanged. It did get as high as 0.6666
though, so things are starting to get lively. It really highlights the value of having orders in place. The stage was
set going into yesterday with the market starting to price in rate cuts out of the US that it hadn’t really given enough
weight to. The RBNZ Assistant Governor then came out with a speech, which was unusually candid, basically saying they
thought a 40 point cut would be all that’s needed. While this still leaves one more cut on the table, it makes that only
50/50 and implies they would not cut more than that. This led to direct NZD strength.
On top of this initial strength, Fed Reserve Chair Powell came out with Dovish comments which solidified the markets
view of US rate cuts. There was also a horrible Jobs number, coming in at just 27k increase in people employed for the
month. This compared to 185k jobs expected. To put this in perspective, this is not the most volatile data set, and the
worst number since 2010.
Out of Europe, the EU has triggered disciplinary process against Italy over its debt levels. This is the start of a
process which could potentially lead to a fine, so more a warning than a massive announcement, however we think Italy is
going to be mentioned a lot going forward. In our view this was relatively inevitable. If you remember circa 6 months
ago Italy was saying they could not meet the EUs debt to GDPs target, and there was a mini crisis of confidence. This
was resolved by much back and forth, and then Italy basically agreeing to the targets, saying they would hit them as
they forecast GDP to increase. The surprising thing here was everyone took them at their word, and crisis over. Now 6
months down the track, Italy apologises for missing the target, citing lower than forecast GDP. The reason this is all
so important is that Italy is the 8th largest economy by GDP, just behind the UK, and if an Italian crisis spills into a
European crisis with a backdrop of slowing global growth, you have quite the recipe for a recession.
Global equity markets were generally up- Dow +0.82%, S 500 +0.82%, FTSE +0.08%, DAX +0.08%, CAC +045%, Nikkei 1.8%, Shanghai -0.3%.
Gold prices rose 0.6% to $1,334 an ounce. WTI Crude Oil prices dropped a further 2% to US$51.74 per barrel.
ends