The spotlight was focused “down under” today as data helped to push both the Aussie and the Kiwi dollars higher, but a late day surge in the Euro looked to steal the show. The session got off to a quick start today with New Zealand’s RBNZ hiking rates by .25 basis points to 2.75% as was expected. The hike sent the NZD/USD heaving higher with an initial 40 pip jump to 0.6705 and consequent gains to highs near 0.6785. Following the first hike in three years from the RBNZ, a quick wave of positive employment data out of Australia including a lower unemployment rate of 5.2% versus 5.4%, and a higher number of jobs created (+26.9K as opposed to the forecast of 20.1K), helped push the AUD/USD to eventual gains of 130 pips to highs just over 0.8390. Very firm Chinese trade balance results of +19.5B opposed to an expected 8.2B helped in the boost of risk appetite once the data was leaked.
With risk higher and equities hovering in positive territory, the EUR/USD took the cue and pulled itself up from lows near 119.60 to 120.55 helped along the way by short covering. Many traders looked to square up positions ahead of the ECB rate decision and subsequent press conference which many believe could contain talk aimed to shore up confidence in the European currency. China had a hand in the return to risk today as the chief of the Chinese national pension fund stated that the Euro will be able to “stabilize and survive the crisis.” Yen crosses were well bid with the EUR/JPY moving a handle to 109.90, GBP/JPY gained 90 pips to 133.10, and AUD/JPY impressed moving from 75.40 to 76.55 highs.
A wave of upbeat data out of Japan failed to illicit a response from the USD/JPY as the pair once again stagnated in Asia between 91.15 and 91.35. Japanese GDP came in at 1.2%, beating 1.1% projections and household confidence came in at 42.8, firmer than projections by .5.
All eyes will now be intently focused on the ECB and BoE rate decisions due out later in London. While rate are expected to remain unchanged at 1.00% and 0.50% respectively for the EU and UK, it’s the following press releases that will hold everyone’s attention. The ECB’s Trichet needs to triage his currency in the light of the global media, thus mollifying the deafening criticism of the ECB’s lax response to the recent sovereign debt crisis.