Royal Bank Of New Zealand Cut's Rates By 50 Basis Points, AUD And NZD Down As USD Hits 1 Year High Against Euro

Daily Forex Fundamentals | Written by AC-Markets | Sep 11 08 08:23 GMT |

Market Brief

The EURUSD Continued to tumble yesterday as it traded range bound between 1.3933 - 1.3988. The impressive run the dollar has given us as of late indicates it has fully reverted to its traditional safe-haven status - investors expressing their risk aversion through the Greenback. The psychological 1.40 barrier opens the way for more gains for the dollar on a technical basis. The markets seem to have fixated on the 'least worst option' psychology, the dollar strength feeding off the weakness of European and Asian economies. On this day when we commemorate the September 11 attacks on the WTC, we can solemnly say the 'Greenback is BACK!' - ending a 5 year cycle of weakness. However, some analysts and investors heed warning, is the dollar appreciating too fast?

The Yen remains robust in the face of the Dollar's rise - again brought on by risk aversion in overseas economies and not in fundamental domestic economy strength. The Yen seems to be reaping gains from the psychology of investors amid a global slowdown. The USDJPY traded in a 107.32 - 107.87 range during the early Asian session and continuing near the 107.00 level. Core Machinery numbers released this morning were down by 3.9%, below market expectations of 3.6%. The weak Japanese economy and strong yen continuing to prove the inverse relationship between the two.

The RBNZ cut rates by 50bp versus markets expectations of 25bps, in a bid to appease economic worries - the last time such a drastic cut was in the wake of 9-11. The three consecutive quarterly declines. Analysts don't rule out the possibility of further rate cuts by the RBNZ in coming months. The AUDNZD cross is expected to rise in the short-term as the RBA isn't expected to cut rates in the coming months despite feeling the global slowdown as well. The NZDUSD is down 3% on the back of this news.

Today is light on economic data, US trade balance and Jobless claims out at 12:30 GMT could be market movers. While the underlying drive for the dollar strength remains risk aversion, a slowing economy - exports down and jobless claims up - are notable catalysts that could send the EURUSD higher. Crude continues lower, trading below $103 for more than a day now, while gold loses $50/oz in one trading day.

ACM FOREX

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