By Dan Bell
The NZDUSD opens at 0.6705 (mid-rate) this morning.
Risk aversion brought about by political uncertainty in Germany and US trade tariffs has seen equity markets fall and safe-haven currencies outperform.
Germany’s political crisis worsened yesterday with interior minister Horst Seehofer, who is also head of the Bavarian CSU party offering his resignation as party head and interior minister, saying that he wasn’t satisfied with the EU deals. Following closed door discussions with his party members he agreed to give Merkel another 3-day ultimatum to find a comprise – otherwise he definitely would resign.
Concerns that the US will go ahead and impose tariffs on $34 billion worth of Chinese imports and that China will retaliate in kind on July 6th unless both sides can make enough progress toward a trade cease-fire this week, has seen equity markets slip lower overnight.
The USD was also helped higher by better-than-expected manufacturing data with the Institute for Supply Management (ISM) reporting its purchasing managers index climbed to 60.2 in June after rising to 58.7 in May. The index had been forecast to edge down to 58.4.
The UK manufacturing sector continues to expand at a moderate pace with the Purchasing Managers’ Index edging up to 54.4 in June, from 54.3 in May. The result was ahead of the expected 54.2 reading.
The highlight for the NZD today will be our business confidence report while direction for the NZDAUD cross rate will be come from this afternoon’s RBA monetary policy statement.
Global equity markets are broadly lower, – Dow -0.19%, S&P 500 -0.15%, FTSE -1.17%, DAX -0.55%, CAC -0.88%, Nikkei -2.21%, Shanghai -2.52%.
Gold prices are down 0.8% trading at $1,242 an ounce WTI Crude Oil prices have slipped lower, down 0.9% trading at $71.81 a barrel.
Current indicative rates:
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Dan Bell is the senior currency strategist at xe money transfer in Auckland. You can contact him here »