NZ business sentiment slumps

Today's Highlights

Greek deal may still unravel

NZ business sentiment slumps

US employment data still strong

FX Market Overview

It seems amazing that even after a whole bunch of austerity legislation cleared the Greek Parliament, we are still talking about it being a crisis but nothing much has been resolved yet. The last minute deal that was reached appears to be one that is unwanted, unworkable and unfundable. The International Monetary Fund is demanding assurances over debt relief from the EU before it provides funding for the plan and that could be a real problem for Greece. The Euro remains weak ahead of the month end profit taking and ahead of today's Eurozone unemployment data which - by the way - is expected to be a tad positive; albeit still at an unacceptably high 11%. When any currency is at the far end of its ranges, there is room for it to move on the last day of the month and I suspect the euro will strengthen a tad in later trade.

We heard overnight that New Zealand business confidence plunged in July. The minus 15.3 index reading was much worse than last month's -2.3 and it was enough to weaken the already struggling NZ Dollar.

In fact all the currencies of countries that have significant commodity exports are in the doldrums. Without wanting to rake over old ground, this fall is related to the drop in Chinese demand and the consequential fall in the base prices of commodities in all categories. So the Australian Dollar is still sliding, the South African Rand is nearing record levels of weakness and the Canadian Dollar is doing likewise.

Yesterday's big news was a rebound of 2.3% in US economic growth but that was a little down on most forecasts; so the markets were disappointed. Nevertheless, the US Dollar did strengthen on the news and, if you look at the alternative currencies out there, it isn't such a surprise. Whilst we will have to wait another week for the US employment report for July, the weekly jobless claims figure from yesterday was higher than the record low we saw in the previous week. That bodes well for the US recovery and may add weight to the calls for early interest rate hikes from the Federal Reserve. Hence the strength of the USD.

And the moral dilemma story of the week starts with two bank employees in America. They were refilling ATM machines in Mahwah, New Jersey on Monday when they had to shuffle the contents of their car in order to get some other things in. One of the employees put a satchel containing $150,000 down on the grass next to their car and then they got in and drove off without it. Needless to say, it wasn't there when they came back 15 minutes later. So, the question is; you see a satchel on the grass, you open it to see if you can work out to whom it might be long and you find $150,000 in used notes inside. What would you do next? I'll leave you to ponder that all the way into August. Have a great weekend.