By Dan Bell
The NZD/USD came under selling pressure in the early European session, dropping to a low of 0.7856, but a stronger US stock market led by banking shares and a report that Germany and France have agreed to boost the European bailout fund to 2 Trillion euros, has the NZD/USD trading back over 0.7950 this morning.
The EUR/USD opens around 1.38 after trading to a low of 1.3650 while the AUD/USD is back around 1.03 after trading to a low of 1.0115.
A report this morning that France and Germany have reached an agreement to boost the Eurozone's rescue fund to €2tn to resolve the sovereign debt crisis, has been cited by various market news agencies this morning - at this stage we are not convinced this report is based on any new developments but the story has seen markets spike up across the board.
US stocks are currently up approx 1.5% led by bank shares after Bank of America announced a better than expected result for the 3rd Quarter and the story above.
German investor sentiment fell to the lowest in nearly three years and China’s Q3 GDP rose less than expected slowing to its weakest pace in 2 years. China GDP still grew at a healthy 9.1% from a year earlier.
Moody's warned on Monday it may slap a negative outlook on France's Aaa credit rating in the next three months if the costs for helping to bail out banks and other euro zone members stretch its budget. Moody’s warning is a reminder that leveraging up of the European Financial Stability Facility (EFSF) and government recapitalization of European banks may actually erode investor confidence in core euro zone sovereign debt given the significant costs associated. .
The NZD is weaker against the AUD this morning trading to a low of 0.7755. Against the EUR we open around 0.5785 and GBP at 0.5070.
Markets remain extremely fickle and volatile so take care managing your exposures.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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