NZD avoids European negativity

11.07 NZST, Wednesday 27 June 2012

NZD avoids European negativity

By Andrew May (Sales Trader, CMC Markets New Zealand)

With the twentieth 'make or break' European summit vastly approaching a non-consensual climax for the ensuing Sovereign debt crisis, the euro has floundered with the NZD subsequently flourishing.

We are at present trading a comfortable four month 0.6330 high against the singular European currency post a 0.6340 resistance breached in early trade and have the historic 64c from February in the line of sight.

Apart from Germany’s performance in the European Football championships, German Chancellor Angela Merkel has nothing whatsoever to cheer and applaud. Spanish & Italian 10 year yields are once again approaching the 7% unsustainable mark and she is vehemently opposed to a fiscal union roadmap, including a common Treasury implementing spending and tax policies alongside the issuing of Eurozone bonds. Germany it seems will not approve shared debt liability with Merkel at the reins.

With the above uncertain events perhaps pushing the Eurozone into factions, the NZDEUR made good ground as a consequence. Locally the appointment of new Reserve Bank Governor Graeme Wheeler bolstered confidence for the Kiwi, although markets are not expecting too much change in monetary policy come September when existing Governor Dr Bollard steps down.

Week end data on the forefront won’t rock the boat terribly. Expect the bulls to be diving head first into risk sentiment, pushing up the price of commodities and growth sensitive currencies. Likewise the NZDUSD has bubbled around three week 79c highs and looks set to take direction and retest 0.7930-50 as global markets continue to rally.
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