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NZ Labour Cost Index and overnight action - 2 August

Written by Sam Coxhead on August 2nd, 2011.      0 comments

10:55 AM (NZT) The Q2 NZ Labour Cost Index grew as expected at .5%, and has resulted in just a small appreciation in the NZD, as can be seen from the table below.
There was significant volatility in offshore markets as the illiquid nature of the northern hemisphere holiday season starts to show itself.
Dismal manufacturing numbers in the UK and US made poor reading and saw the GBP under pressure. Adding to the mix were further concerns about European debt issues that saw banking stocks under intense pressure, especially in Italy. This raises the concerns that the debt contagion has not been stemmed by the Greek bailout extension, and will no doubt remain at the fore-front of investor focus in the coming sessions. The delaying of the voting on the debt ceiling agreement in the US also adds to fears that there is a possibility that the agreement will not be passed as first thought. Although surely this would be an unlikely outcome.
As fears rose the demand for the true ”safe havens” of the CHF and YEN grew. The Bank of Japan have been paying lip service to intervention to curb the strength of the YEN , which is certainly not in demand on the back of current fundamentals. To my mind any action is unlikely ahead to the vote to pass the US debt agreement into law, as it would potentially limit the impact of intervention.
Next on the agenda today is the RBA decision on the cash rate. Expect no change at this meeting, even if a few Australian banks have recently been calling for a hike on the back of the higher than expected inflation number last week. Odds are for stronger wording in the statement, that will likely be backed up in the quarterly Monetary policy Statement due for release from the RBA on  Friday.
          Past 24 hours
  Current level Pre-NZ LCI  % Chge NZ LCI   Low High
NZD/USD 0.8770 0.8760 0.11%   0.8734 0.8843
AUD/USD 1.0975 1.0974 0.01%   1.0923 1.1066
NZD/AUD 0.7991 0.7983 0.10%   0.7965 0.8000
AUD/NZD 1.2514 1.2527 -0.10%   1.2500 1.2555
NZD/GBP 0.5381 0.5375 0.11%   0.5349 0.5390
NZD/EUR 0.6151 0.6145 0.10%   0.6095 0.6166
NZD/YEN 67.92 67.88 0.06%   66.90 68.89
NZD/CAD 0.8381 0.8375 0.07%   0.8366 0.8421