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Westpac Global Markets Strategy Group: Morning FX Thoughts - NZ Edition

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Fuseworks Media
Fuseworks Media
Westpac Global Markets Strategy Group: Morning FX Thoughts - NZ Edition

Turmoil. There was no fresh news of relevance, but risk markets plunged globally on the growing wall of worry that some European nations may default on their debt and imperil the future of the Eurozone.

Eurostoxx 50 futures are currently down 7%, and the S&P500 was down 9% an hour ago (automated selling errors may have contributed) but has recovered to -3.5% currently. The VIX index of risk aversion spiked to 41, a level last seen in April 2009.

The commodities basket fell 1.9% overall, with oil plunging 4.6%, copper 2.4%, but gold doing its job at +2.0% to a December high of $1198. US 10yr treasuries shed 16bp (at one point it was +28bp), and the 2-10yr curve flattened 4bp. US 3mth Libor rose 1.3bp - a sign Eurozone contagion is affecting dollar funding costs.

The US dollar index surged again to a fresh 12-month high of 85.27 (from 84.20 at the Sydney close), and sits just under 85.00 currently. The EUR was severely damaged, from around 1.2800 to 1.2529, last seen in March 2009.

The ECB at its meeting produced nothing for those hoping for at least a discussion of measures to curb the panic. GBP also made a 12 month low at 1.4718, nervous ahead of the UK elections result. The yen was a massive outperformer (up around 5%), with the CHF the only other positive currency on the day. USD/JPY fell from 94.00 to 88.26, and is currently just under 90.00. AUD fell from the Sydney close around 0.9050 to 0.8715, recovering partially to 0.8865. NZD fell from around 0.7250 to 0.7011, recovering to 0.7120. AUD/NZD ranged wildly between 1.2420 and 1.2540, currently at 1.2430.

AUD/USD and NZD/USD outlook next 24 hours: Until the Eurozone-inspired turmoil subsides, daily forecasting will be difficult. AUD's suggested range for today is 0.8700-0.9000, while for NZD it is 0.7000-0.7250.

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