NZ Dollar slumps on RBNZ intervention confirmation

Today's Highlights

NZ Dollar slumps on RBNZ intervention confirmation

UK GDP data awaits

End of Quarter 3 ensures volatility

FX Market Overview

Ryder cup success for the European team is one of the few positives for Europe at the moment. The economies of Europe are suffering from lack of growth and falling consumer and business confidence and the British Conservative Party goes into its party conference with a pledge to hold a referendum on European Union membership. It is perfectly understandable that the Euro is on the back foot. This week's swathe of Eurozone inflation data will be overshadowed by the interest rate decision from the European Central Bank. There is a strong chance of some sort of surprise announcement from the ECB as they battle the Eurozone downturn so traders will tend to weaken the euro in the lead up to Thursday's announcement.

Last week centred on central bankers and the estimations of when interest rates would start rising in the UK and America, when the Australian central Bank would start tightening mortgage rule and whether the New Zealand Central Bank would intervene in order to weaken the NZ Dollar and help NZ exporters.

The Reserve Bank of New Zealand put their money where their mouths are over the weekend when they announced they spent half a billion kiwi dollars during August to weaken their currency. That kind of intervention generally has a short lived effect but the confirmation of the RBNZ action dropped the value of the NZ Dollar immediately. Banks are clearly nervous about it and a pullback is highly likely as traders take profit.

Other currency pairs on the move are the Euro - US Dollar rate which has fallen into the $1.26 range and the Sterling - Australian Dollar rate which has tracked the GBP-NZD rate higher. The Reserve Bank of Australia will be seeking to calm things down a tad when they release their annual report on Thursday but Aussie exporters need a weaker currency too, so they won't be over-egging their calming comments.

The news for the coming week includes the final estimate of UK economic growth, a similar announcement for Canada and the US employment report on Friday. Those are the more significant events but there are heaps of confidence indices and employment reports from elsewhere and it is the last few trading days of September and of the third quarter of the year. That can cause its own level of volatility, so beware.

Quote

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