NZ$/US$ ranged between 0.800 and 0.7870 overnight, driven by Euro resolution rumours

By Mike Burrrowes

NZD

The NZD has continued to take its cues from developments in the European debt crisis. NZD/USD is broadly unchanged over the past 24 hours, despite a slew of headlines from Europe.

NZD/USD reached a high just below 0.8000 during the early evening as sentiment stabilised. Following this, NZD/USD fell to a low around 0.7870 during the early evening as some negative comments from Europe hit the market. NZD/USD is currently trading around 0.7950.

Trading in the NZD relative to the EUR and GBP was very uneventful. NZD/EUR has spent the past 24 hours oscillating around 0.5770. NZD/GBP briefly popped above 0.5060 during the evening, but is now trading around 0.5020.

The NZD/AUD briefly spiked to an overnight high of 0.7790, but the move appeared to be driven by short-term positioning. The cross is now trading around 0.7740, unchanged over the past 24 hours.

Looking to the day ahead, we have the release of NZ net migration and credit card spending. Expect the NZD to take its cues from developments in the European rescue plan. NZD/USD support is seen at 0.7900 and resistance at 0.7990.

Majors

Markets have spent the last 24 hours treading water, despite a barrage of headlines from Europe overnight. It now appears the much awaited EU rescue plan will not be announced until next week. The USD index is unchanged at 77.20 over the past 24 hours.

The lingering concerns around the EU rescue plan saw the Euro Stoxx 50 index shed 2.5%. Sentiment has recovered this morning, with the S&P500 index up a modest 0.4%. The VIX index (proxy for risk aversion) edged up from 34.5 to 35.6. Commodity prices declined overnight, with WTI oil and gold falling 1% and 1.8% respectively.

EUR/USD is virtually unchanged over the past 24 hours as markets remain paralysed by this weekend’s EU Summit. EUR/USD is currently trading around 1.3730.

EU leaders are making progress towards finalising the details of the rescue package. However, not surprisingly given the tight time frame, it was announced early this morning that a second EU Summit will be held next week to reach a final agreement on the rescue plan.

Ratings agency Fitch warned overnight of its negative outlook for the largest Italian banks. At the same time, Fitch also kept its negative outlook on Belgium. Expect ratings pressure to remain on European sovereigns for the foreseeable future.

Trading in the other major currencies was very subdued overnight. GBP/USD is broadly unchanged at 1.5760 over the past 24 hours. The GBP was received a boost following better-than-expected UK retail sales for September (0.7% vs. 0.2%m/m). However, the data has done little to change the view of a sluggish UK economy.

Comments from Fed member Bullard were largely overlooked by the market. Bullard noted that “more quantitative easing is possible if economy weakens further”. US data outturns continue to paint a mixed picture, with the Philadelphia Fed survey for October beating expectations (8.7 vs. -9.4 expected) while existing home sales for September disappointed (-3% vs. -2.3%).

Looking to the day ahead, expect the market to remain focused on the Eurozone debt crisis. Expect some headlines from the EU Summit over the week, but any rescue plan will not be announced until next week. Comments from the Fed’s Kocherlakota may briefly grab get some attention. 

Mike Burrowes is part of the BNZ research team. 

All its research is available here.