Commodity combo pushes NZDGBP towards 56p

11.21 NZST, Wednesday 3 April 2013

Commodity combo pushes NZDGBP towards 56p
By Andrew May (Sales Trader, CMC Markets New Zealand)

The European currencies have lost ground against the New Zealand dollar overnight. A strong-winded combination of local dairy price data, a surprisingly high prevailing commodity price index, and an announcement that Chinese manufacturing has hit an eleven month high drove down both the Sterling and the Euro in unison.

The NZD is sitting comfortably at EUR 65.69 after retreating from 65.80 highs albeit eyeing last August's record high of 66.42 while firmly entrenched at 65.57. NZDGPB likewise has found itself firmly supported at 55.65 currently trading a 55.71 post float high. No such retrenchment is looking likely for either pair as a cavalcade of dreary European PMI readings only further cemented the Kiwi's growth spurt overnight.

Let us not forget that as traders returned from the Easter break the NZDUSD has found itself fully supported once again at early January 83.50 levels. Commodities it seems have driven the Kiwi ahead on all fronts as we touched 84.49 before consolidating today's 84.15 open.

The NZ trade session was boosted in part by an incredibly buoyant 7.4% commodity price index (against 1% expected). The average price of the global dairy price auction has now increased 77% since last May amidst prices for whole milk powder doubling in US Dollar terms. The drought last year in the US and the current lack of rain in New Zealand is still driving the price structure and heavily influencing our dollar.

Whether you see the glass half full or half empty, risk is luring investors back to the carry trade of the commodity driven currencies. The RBNZ will again be scratching their heads in bewilderment for ideas come the 25 April OCR meeting for containing a Kiwi dollar vastly approaching US 85c.

Web: http://www.cmcmarkets.com/

© Scoop Media