By Dan Bell
Over the weekend meetings between world finance leaders and euro-zone officials has finished with the communiqué revealing they may look to maximize the size of the European bailout fund by borrowing against it. One ECB member suggests the EFSF should be increased to 1 trillion and they may look at enacting it a year early. At this stage nothing is set in stone.
The 17 EU members will be discussing the details at their Economic and Financial Affairs Council (ECOFIN) meeting on Monday 3rd October. Question marks over Germany’s commitment to pull out all stops given high level of public opposition.
Suggestions Greece may seek an orderly default with Greek creditors to take a 50 percent haircut on their bond holdings. Nothing confirmed at this stage so markets will remain focused on any Greece news this week.
IMF Chairman Tharman Shanmugaratnam said the organization is acutely aware of global risks and “ is ready and will deliver on any type of resources necessary and available to all its members”
The NZD/USD bottomed out around 0.7730 on Friday night before recovering back to 0.7800. We open this morning with very thin liquidity jumping 0.7750 and 0.7820.
Gold prices were down again on Friday night losing $120 in 2 days which is the biggest two day sell off since 1983. Silver then was off 16% and copper fell 6%.
Equity markets stabilized on Friday night with the US market ending marginally higher (S&P 500 up 0.5%)
Against the major cross rates the NZD continues to underperform opening around current levels: 0.7900 AUD, 0.5740 EUR, 0.5740 GBP, 59.40 JPY.
On the local front we get Trade Balance numbers today and Building Consents and NBNZ Business Confidence on Friday.
We are expecting the market to remain extremely volatile this week.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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