17 May 2010 15:30
Kiwi Dollar piggybacks on strong Aussie Data
European uncertainty continued to cause havoc in last week's forex markets, including the Dollar. Spanish newspaper, El Pais, cited that French President Nicolas Sarkozy threatened to pull out of the Euro unless German Chancellor Angela Merkel agreed to back the European Union’s bailout plan at a meeting last weekend
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The Euro fell 2.2% last week alone after an unprecedented loan package of almost 750 billion euros.  The New Zealand Dollar piggy-backed on the Aussie Dollar’s strengthening last week Thursday, after strong jobs data was released.  Investors are withdrawing funds from the European market en-masse and re-investing their money in countries with higher yielding exchange rates such as New Zealand and Australia – especially Australia.

The Kiwi has now reached nearly 3-year highs against the Euro, and its performance against the British Pound also needs to be mentioned, both because of the strong economic data out of New Zealand, but also because Great Britain as a whole has never fully recovered from the market crash of 2008.  If anything, Britain seems to just be getting worse, and the recent European downturn has certainly not helped the economy.  

The country is grappling with a record 153 billion-pound ($236 billion) deficit following a deep 18-month recession during which about 1.3 million people were laid off and tens of thousands of people lost their homes. Britain’s new government announced it would cut 6 billion pounds from back office public services over the next financial year, but some experts fear a possible double-dip back into the red if there is not firm economic leadership.  The hard work is therefore only just beginning for new Prime Minister David Cameron.  "No modern government has inherited such a difficult economic situation," said finance minister George Osborne, vowing to cut the deficit at a "significantly accelerated" rate compared to Gordon Brown's Labour.

The New Zealand Dollar finished at 2.047 to the British Pound at the end of Friday’s trading, at 1.254 to the Australian Dollar, and at 1.394 to the Greenback.

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