The USD ended the week on a soft note as the euro pushed above 1.3100

Morning Report

Trade deficit grows in October

The NZD weakened slightly on Friday morning’s local session with the October trade balance being released. The trade balance was a deficit of $1,170 million for October compared to an expected deficit of $625mn. The annual deficit also grew to $6,160m. These results caused an initial sell-off but the NZD recovered later in the day. Overnight saw the NZD spike to a high of 0.6740 on a wave of USD weakness. The NZD has eased slightly to open today around 0.6725.

AUD at 6-month highs

The AUD has continued to climb for the last 10 days opening this week at highs of 0.7791. This is the highest the AUD has been at since it spiked to similar levels back in May 2006 and September 2005. The AUD has benefited from a week of USD softness due to the concerns that central banks are starting to diversify their foreign currencies reserves away from USD. A stronger gold price has also helped the AUD performance. The NZD/AUD cross trade to a low of 0.8606 but has since bounced back to today’s open of 0.8634.

USD weakness gains momentum

The USD ended the week on a soft note as the euro pushed above 1.3100 for the first time in over 18 months. Although there were no data releases, a domino effect of selling was prompted by concerns that central banks are continuing to diversify their reserves away from the USD, with concern also growing that the currency’s yield advantage ill narrow. Negative sentiment also played against the USD following a recent string of weaker-thanexpected US economic data.

No US data to report. Thanksgiving Friday.

German CPI jumps from 1.1% yr to 1.5% yr in Nov. This follows the sharp energy driven plunge in the prior two months, and still leaves the annual inflation rate lower than at anytime between early 2004 and August this year. The CPI actually fell 0.1% in Nov, but unfavourable base effects pushed the annual rate higher.

UK GDP growth unrevised in Q3 at 0.7%. As reported earlier in the week, business investment was strong, up 2.3%, but this was offset by slower consumer spending growth of 0.4%.