XE Morning Update
The Kiwi opens at 0.6461
The NZD had a wild ride yesterday as RBNZ Gov Adrian Orr surprised the market with a 50 basis point cut in the OCR, taking rates down to 1%. The market was expecting a 25 point cut, and as what happens when it gets surprised, reacted quickly. After the initial decision there was a press conference in which Orr took questions. He explained that the cut does not rule out further action, and that negative Interest rates are a possibility. This led to the Kiwi being down over 2% across the board. It has since recovered somewhat, after breaking down to 3 and a half year lows against the USD.
The AUD also had a big sell off, getting dragged down into the mire with the Kiwi. Having the RBNZ cut so aggressively puts more pressure on the RBA to also cut at their next meeting. It is all relative in the central bank race to the bottom. If you are looking to cut rates to help stimulate the economy, lower your currency and help exporters, then if another Central Bank cuts it forces your hand somewhat to do the same.
Tomorrow out of Australia we have the RBA’s policy statement. You get the feeling they might be rewriting large swaths of it, and it is going to be a bit more interesting than it was.
Global equity markets have rebounded to slightly positive- Dow +0.05%, S&P 500 +0.26%, FTSE 0.38%, DAX +0.71%, CAC +0.61%, Nikkei -0.33%, Shanghai -0.32%.
Gold prices enjoyed the turmoil, up 3.1% to USD$1,516 an ounce. WTI Crude Oil prices have continued their rout, down another 4.1% to US$51.61 per barrel.