By Dan Bell
News that China PMI (Purchasing Managers Index) indicated its economy is not as weak as some had feared, coupled with a generally successful Spanish and French debt auctions, provided support for 'risk assets' such as the NZD. However, it should be noted Spain's borrowing costs here are its highest in 14 years and are unsustainable in the longer term.
European Central Bank President highlighted the euro zone fragile outlook, and indicated the downside risks to the economic zone has increased. This has raised the possibility the ECB could cut interest rates next week.
The NZD/USD has risen over 5% this week, after the major central banks sparked a rally in risk assets when it took aggressive steps to prevent a global credit crunch. However, these steps are merely treating a symptom of the European debt crisis - it is not a cure.
Commodity prices were somewhat mixed. Gold prices touched a 2-week high of USD$1,754 an ounce, before retreating a little to USD$1743. Base metal prices were generally weaker with Copper 1% lower, while Tin and Nickel fell a hefty 3.8% and 4.3% respectively.
Global equity markets eased a touch lower on the day, after the previous nights massive surge higher.
There is no data of any note scheduled locally today.
We expect the markets will be relatively calm during our day, while we await the release of the influential US non-farm payroll employment figures Friday night.
The indicative NZD levels are: 0.7785 USD, 0.7605 AUD, 0.5780 EUR, 0.4960 GBP, and 60.45 JPY.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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