Forexpros – The New Zealand dollar surged to a two-month high against its U.S. counterpart on Friday, erasing the week’s losses as news of an agreement on fresh measures to tackle the euro zone’s sovereign debt crisis boosted demand for risk-related assets.
NZD/USD hit 0.8040 on Friday, the pair’s highest since May 3; the pair subsequently consolidated at 0.8008 by close of trade on Friday, rallying 1.44% over the week.
The pair is likely to find support at 0.7848, last Friday’s low and resistance at 0.8105, the high of May 3.
Risk sentiment found strong support after European Union leaders agreed on Friday to use the euro zone’s bailout funds to support struggling banks directly, without adding to national debt and also agreed to set up a joint banking supervisory body for the euro area.
In addition to the direct recapitalization of Spain’s banks, euro zone bailout funds will be able to purchase government debt in order to keep down borrowing costs.
EU leaders also agreed to devote EUR120 billion in stimulus to encourage growth and create jobs.
Announcing the deal, EU Council President Herman Van Rompuy called the accord a “breakthrough” and said it would break the “vicious circle” between banks and national governments.
Following the announcement, the yield on Spanish 10-year bonds fell back to 6.32%, after rising to the critical 7% level on Thursday, while the yield on Italian 10-year bonds eased back below 6%.
In the U.S., a revised report by the University of Michigan showed on Friday that the index of consumer sentiment declined unexpectedly in June, ticking down to 73.2 from a reading of 74.1 the previous month. Analysts had expected the index to rise to 74.2 in June.
A separate report showed that the index of manufacturing activity in Chicago rose to 52.9 in June from 52.7 the previous month, beating expectations for a reading of 52.8.
The reports came after official data showed that personal spending in the U.S. was unchanged in May, disappointing expectations for a 0.1% rise.
Meanwhile, official data showed that building consents in New Zealand declined 7.1% in May after a 7.6% fall the previous month.
Earlier in the week, the National Bank of New Zealand said that its index of business confidence fell to 12.6 in June from a reading of 27.1 the previous month.
In the U.S, markets will be closed on Wednesday for the Independence Day holiday, while the country is to release official data on nonfarm payrolls report on Friday, after disappointing results in June sparked concerns over the strength of the U.S. economic recovery.
Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets.
Monday, July 2
In the U.S., the Institute for Supply Management is to release a report on activity in the manufacturing sector. Also Monday, markets in Canada are to remain closed for a national holiday.
Tuesday, July 3
The U.S. is to publish official data on factory orders, a leading indicator of production.
Wednesday, July 4
Markets in the U.S. are to remain closed for the Independence Day holiday.
Thursday, July 5
The U.S. is to publish a report by payroll processing firm ADP on non-farm employment change, followed by government data on unemployment claims. The country is also to release an ISM report on service sector growth, as well as government data on crude oil stockpiles.
Friday, July 6
The U.S. is to round up the week with official data on non-farm employment change and the unemployment rate, as well as data on average hourly earnings, an important indicator of consumer inflation.
Forexpros
