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NZ dollar steady vs euro as Italy coalition talks falter, commodity prices fall

Monday 28th May 2018

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The New Zealand dollar was little changed against the euro after talks broke down on forming a new government in Italy and held steady against the greenback as oil led a decline in commodity prices on Friday.

The kiwi dollar traded at 59.20 euro cents as at 8am in Wellington from 59.24 cents in late New York trading on Friday. It was at 69.20 US cents from 69.16 cents in New York while the trade-weighted index was at 72.63 from 72.62.

Reuters reported that Italian President Sergio Mattarella rejected a eurosceptic for the economy ministry, prompting the far-right League and the 5-Star Movement to call for a new vote as soon as possible. Meanwhile, in Spain the centre-right Ciudadanos called for new elections, putting it in line with the opposition Socialists party, following members of the ruling Popular Party being found guilty of fraud. 

"Frequent elections and political paralysis are nothing new for Italy but the prospect of an anti-establishment, Eurosceptic coalition seemingly on a collision course with Brussels was highly unsettling for the markets" and weighed on the euro, said Nick Smyth, interest rate strategist at Bank of New Zealand.

Crude oil led a decline in commodity prices on Friday after reports that OPEC nations are considering an increase in production. The CRB Index of 19 commonly traded commodities fell 1.1 percent on Friday. Global risk appetite may have been helped by talk that the US and North Korea may yet hold a summit meeting. The kiwi rose to 75.87 yen from 75.51 yen.

With no economic data scheduled in New Zealand today, trading may be relatively subdued, with US markets closed on Monday for the Memorial Day holiday and the UK closed for the spring bank holiday. Traders will be watching, however, for the government's announcement today on whether to contain or try to eradicate the cattle disease Mycoplasma bovis and later in the week, for the Reserve Bank's financial stability report, which gives governor Adrian Orr an opportunity to comment on monetary conditions.

The kiwi dollar traded at 51.94 British pence from 51.84 cents on Friday in New York. It rose to 91.52 Australian cents from 91.41 cents, and gained to 4.4214 yuan from 4.4119 yuan.


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