ECB rate cut favours the higher-yielders

Australian Dollar:

The Australian dollar did well intraday yesterday to hold onto levels in excess of the 0.9250 mark when valued against its US Counterpart after figures showed the balance on goods and services was a deficit of $122 million in April well below the surplus number markets had anticipated. Whilst remaining firm early in the piece a solid platform had been set allowing the Australian dollar to rally overnight after European Central Bank cut their benchmark interest rate to 0.15 percent whilst effectively outlining measures in which other banks will be charged to store funds. In an announcement which has triggered large moves across currency markets, the prospect of record low yields for an extended period has seen the Australian dollar gain overnight reaching a high of 0.9345. Opening this morning half a cent stronger at 0.9335 non-farm payrolls from the United States this evening promises further volatility leading into the extended long weekend.    

• We expect a range today of 0.9290 – 0.9370

New Zealand Dollar

With investors pushing funds back into New Zealand dollar assets overnight the broader move in search of higher returns was triggered by The European Central Banks historical decision to cut interest rates whilst also re-iterating policy makers would not shy away from additional stimulus in the face of weaker than expected inflation. Triggering moves from an earlier low of 0.8416 when valued against its US Counterpart the New Zealand dollar opens significantly stronger this morning buying 84.95 US Cents.  

• We expect a range today of 0.8460 – 0.8530

Great British Pound:

Matching predictions the Bank of England left the key interest rate unchanged at a record low of 0.5 percent overnight whilst also holding its asset-purchase target at 375 billion pounds. In an announcement somewhat overshadowed by the actions of the ECB, overall it has been an extremely positive session for the Great British Pound which has managed to appreciate significantly when valued against the dollar this morning stronger at 1.6815. In other moves the Sterling has struggled against both the Aussie (1.8007) and the Kiwi (1.9790) lower against both currencies.

• We expect a range today of 1.7970 – 1.8040

Majors:

Investors made it abundantly clear overnight that it was all about The European Central Bank, they didn’t disappoint. Rolling out historical measures which involved cutting the benchmark cash rate to 0.15 percent the ECB overnight also became the first major central bank to cut its deposit rate to minus 0.1 percent meaning it will cost other Banks to simply hold funds with the ECB. In measures designed to stimulate growth and ultimately spur upward price moves the most significant part Mario Draghi’s statement was the fact policy makers appear willing to act again, confirming that significant measures including quantitative easing would be considered. Essentially surpassing market expectations, the yard-stick has now been moved in a similar way it was back in 2012 when Mr Draghi announced the ECB would do “whatever it takes”. Rallying to an overnight high of 1.3668 when valued against its US Counterpart the Euro is 60 basis points stronger this morning at 1.3661. In what’s set to keep investors on high alert markets now look towards key employment figures from the United States this evening.

Data releases

• AUD: No data today
• NZD: No data today
• JPY: Leading Indicators  
• GBP: Consumer Inflation Expectation, Trade Balance
• EUR: No data today
• USD: Unemployment Rate, Non-farm employment Change