New Zealand Dollar: While the big news and major market mover over the last 24 hours has been the US election we did see some action locally yesterday with the release of the RBNZ biannual financial stability report. In the report Governor Wheeler basically said they were effectively powerless to a rising NZD in that lowering interest rates were unlikely to cause any lasting fall, while QE would be a sign of desperation. The kiwi initially fell 30 points towards 0.8240 off the release but the losses were quickly regained as the results of the US election began to flow through. The NZD/USD managed to break 0.83 before following other risk related assets lower after a report out of Europe showed lower growth forecasts for the Eurozone countries. This morning we find the NZD relatively unchanged from yesterday’s open currently at 0.8260 with local employment data due out shortly.
We expect a range today of 0.8290 – 0.8220
Australian Dollar: The Aussie has had a bit of a roller-coaster ride over the last 24 hours, mid-afternoon yesterday we saw the US election result take us past 1.0450 to a high just above 1.0470 before sharp falls in US equity markets dropping it right back down to the edge of 1.0400. The euphoria from the quick result lasted all the way through to the opening of the US session but this was quickly reversed with investors chasing safe havens as concerns on the US fiscal cliff and problems in Europe came into focus. The Dow Jones fell through 13,000 with its worse day this year and it is likely local equities today will see similar losses paving the way for further falls in the AUD. For the time being we are holding the 1.04 level and with employment out later today which should also provide some further direction.
We expect a range today of 1.0370 – 1.0450
Great British Pound: With minimal local releases the pound generally followed risk flows yesterday reaching a high close to 1.6040 as the rallies following the US election peaked. The rest of last night was spent losing everything it had gained first after problems in Europe and later as the realty of Obama’s win began to be processed. The European Commission downgraded its growth forecast for most of Europe but the market’s big concern was that the German economy is starting to feel the effects. With equities falling across the board in the US a similar story of falls may occur today before the market turns its attention to the Bank of England. Most are expecting the BOE to keep interest rates on hold and maintain its target for asset purchases, although there are some predicting an increase by as much as 50 billion pounds which would see a further weakening of the GBP. This morning we open at 1.5990 against the USD, 1.5352 against the AUD and 1.9366 against the NZD.
We expect a range today of 1.9310 -1.9390
Majors: The last 24 hours have seen quite a lot of movement on the currency front, with several different forces in play, some to the same event. First off we had the US election results come in late in the Asian session with Obama securing a second term and while the result was by no means certain, what happened after was fairly predictable; the quick Obama win set us up for a rise in riskier assets. The markets don’t like uncertainty so once we had a result the safe havens like the USD and JPY all fell. This was relatively short lived though, as we moved into the US session investors changed their focus from the quick win to the issues it creates, namely the impending so called ''fiscal cliff. This saw a move away from risk with equities, EUR and AUD all falling while we had a sharp rise in USD and JPY. Another factor weighing on the markets and specifically the EUR are problems in Europe, with the European Commission’s autumn forecast outlining lower GDP for Eurozone as a whole and worryingly Germany, Europe’s largest economy. Currently EUR/USD is trading at 1.2766 having fallen from a high of around 1.2870.
AUD: Unemployment rate
NZD: Unemployment rate
JPY: Bankruptcies, Eco watchers survey
GBP: Bank of England rate decision
EUR: European Central Bank rate decision, German trade balance
USD: Initial jobless claims, Trade balance