It’s commodities that have been taking centre stage at the early part of the week. Yesterday it was gold and the push below the 1,100 level, something which has been repeated again overnight. But other commodities have also been under pressure, including oil, platinum and palladium. For currencies, the declines in commodities has put pressure on both the Canadian dollar and also the Aussie. The standout has been the kiwi, recovering from the 0.65 level on the dollar. A continuation of recent trends could once again start to impact on monetary policy expectations, just as the momentum towards an increase in Fed rates this year was starting to build once again. All of this has left the theme of the past few weeks, namely Greece, somewhat in the background.
The focus is likely to remain on other markets today. European equity markets have pushed ahead since the low seen 7th July, with only another 3% to go before new highs for the year are made on the EuroStoxx 50. For currencies, the main policy focus will be with the New Zealand interest rate decision tomorrow evening, where expectations are fairly strong for a further 25bp easing to 3.00% on the key rate. Watch out for further comments on the currency in the accompanying statement, with both the RBNZ and RBA having been more vocal than most on their respective currencies in the past couple of years. Last month they said that the kiwi remains over-valued and that a “further significant downward adjustment is justified”. We’ve seen the trade-weighted kiwi down around 4% since then, so it’s unlikely that we will see a strengthening of their concerns on the currency front.