fxmatters

The general unwind of anxiety continues with gains last week led by the GBP and NZD, and by oil. The RBNZ did little to break the NZD free of the global trend, and is unlikely to do so in the near-term. The G8 finance ministers talked of exit strategies over the weekend, and the BRIC leaders will probably mention the same today, but governments and central banks are largely in “wait-and-see” mode at present. With little news of note expected this week (the Bernanke speech Wednesday being the most sensitive moment), the general re-weighting of portfolios from bonds and cash to equities will probably be the dominate driving force. Markets now appear optimistic about the risks ahead but over-reacting is typical in financial markets. In this environment it would not be surprising to see the NZD/USD push above the 65.9c high of the previous week but there is also a strong chance that any rallies prove to be short-lived.