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Market volatility continues and points towards increased nervousness

Written by Sam Coxhead on May 13th, 2011.      0 comments

10:45 AM (NZT) The offshore session proved to be one of a volatile nature. The European session was certainly on of risk aversion, before more bouyant economic data in the US pushed the market towards a pro-risk bias.

The EUR looks to remain under pressure as the debt concerns remain topical. UK Industrial production numbers lissed expectations and the prospect orf a hike from the Bank of England at some stage in the coming months remains a point of conjecture. The increased medium inflation forecasts provided in this weeks Inflation Report make a case for an earlier than expected hike, but with economic numbers remaining so sluggish and commodity prices looking vulnerable to further correction, maybe the best bet would be to hold off for the time being.

The AUD bounced off support at 1.0580 against the USD and the imporved commodity picture in the US session meant that it avoided testing this level again. It needs to close below this level in order to have another lunge to the downside. The chinese authroities again raised the Required Reserve Ratio (RRR) by 50pts to 21% for the Chinese banks in an effort to curb lending growth and therefore ease inflationary pressure. I would have thought that this may impact sentiment towards the AUD a little more than it has done so far.

The NZD performed well overnight making gains against its major trading partners, with the exception of the AUD, where it remained stable at .7450 (1.3423) after yesterday's post- Australian employment rally.

NZD/USD .7445
AUD/USD 1.0666
NZD/AUD .7450
AUD/NZD 1.3423
NZD/GBP .4880
NZD/EUR .5580
NZD/JPY 64.40
NZD/CAD .7653