By Dan Bell
The NZD/USD opens under 0.8200 this morning after another night of risk aversion across global markets.
The US equity market was weaker across the board with the Dow Jones Index -1.57% and the S&P 500 -1.5% which followed another bad night for European stocks with the German Dax Index down -2.19% and the UK FTSE -1%.
It has certainly been a rough August so far….global stocks have recorded their worst 4 week run since March 2009 and the German stock market has lost almost a quarter of its value! Unfortunately we do not expect this volatility to end any time soon.
The NZD has underperformed against most major currencies overnight dropping to lows around 0.7850 AUD, 0.5670 EUR, 0.4956 GBP and 62.50 JPY.
The Japanese Yen is trading at all time historical highs against the US Dollar around 76.00. The EUR continues to hold up well against the USD and opens around 1.4380 despite German Chancellor Merkel throwing cold water on the Eurobond idea again. The AUD/USD opens just under 1.04.
The annual Central Bank conference Jackson Hole begins this week in the US where Fed Chairman Ben Bernanke is likely to hint at future monetary stimulus like he did at last year’s symposium- QE3!? He is expected to speak on Friday NZT.
The focus this week will mostly be offshore but on the local front we get RBNZ Inflation Expectations Survey on Tuesday, Trade Balance numbers on Wednesday and NZ Q2 Retail Sales on Thursday.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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