Aussie interest rates on hold – but for how long?

Today's Highlights

Greek shares dive

Commodity markets making waves

Aussie interest rates on hold – but for how long?

NZ house prices still climbing

FX Market Overview

The Greek story is the gift that keeps on giving and it is clouding the picture for any good news in Europe. The Greek share market reopened yesterday after a 5 week precautionary shut down. The market immediately slumped by30% but ended the day just 16% down. Perhaps unsurprisingly bank stocks were hardest hit. With a lack of European data, this was seized upon by traders and the euro remained weak. Today's Eurozone producer price index is expected to follow the route of others in declining - roughly in line with the fall in raw material costs. That won't help the euro either.

But, whilst Greek shares stole the headline spots, the machinations of the commodity markets are the stories making waves behind the scenes (he said jumbling his metaphors in an unembarrassed way). Oil prices rebounded from their lows whilst Copper reacted to weak manufacturing data by slumping to a 6 year low and gold, which reacts to confidence as well as manufacturing demand, is at a 5 ½ year low. The New Zealand commodities index hit a 6 year low in July as well. This collapse in commodity prices has the silver lining of supressing inflation around the globe but, as these things are measured in a year-on-year cycle, that will all work its way out of the inflation data in the year ahead and we have to assume inflation will pick up and perhaps sharply. What that does to interest rates as central banks strive to contain inflation is another story but we'll report it as it happens.

The Reserve Bank of Australia left the Aussie base rate on hold early this morning. They said they felt the Aussie Dollar exchange rates were adjusting to the dump in commodity prices but many believe there is more Aussie Dollar weakness to come. Nevertheless, as this change of emphasis in the RBA's statement suggests a move away from their rate hiking bias, the Australian Dollar strengthened by 2 cents against the Pound and a similar percentage against the US dollar in a matter of minutes. That move would have been helped by a strong set of retail data. It is too early to say whether the RBA will have to cut rates again but, for now, the AUD is in slightly better form.

I mentioned New Zealand in passing there but the NZ Dollar is caught in a quandary; commodities depressing their export income whilst their housing market rose the most since 2007 last month. That was an annual rise of 10.1%; a figure which is out of kilter with other domestic data and must rely to some extent on the demand for NZ goods in Australia; their number one export market. For now the NZ Dollar has regained a little strength but there may be more weakness to come if GBPNZD can clear NZ$2.42. That is the 50% retracement of the fall that occurred between 2006 and 2013. Tonight's release of the NZ unemployment, wages and earnings data will play its part in that and the forecast is for a slight uptick in the unemployment level. NZD weakness ought to ensue.

The US Dollar was largely unchanged by the slightly improved manufacturing sentiment index from the ISM. Maybe it will react positively to this afternoon's factory orders data which is expected to deliver a rebound from the last two months of negative figures. That would certainly help the US Dollar.

And finally, women who wear a lot of makeup please take note. An Algerian man who had never seen his wife without full makeup before they were married is suing her for fraud. She apparently looked so entirely different after the wedding when she removed her makeup that he refused to believe she was the same person. He's obviously lacking a few brain cells if he thought she looked like that all the time but maybe it was more of a shock than I am imagining. He apparently thought she was a thief who had broken into the Bridal Suite, so maybe I am doing him an injustice. I have no pictures so I don't know and who am I to judge anyway.