Interest rates remain at the record low of 2.5% in New Zealand

The Reserve Bank of New Zealand (RBNZ) decided to keep interest rates at a record low for a seventh straight time overnight, citing concerns over the ongoing uncertainty around global conditions and the moderate pace of domestic demand. The central bank kept the Official Cash Rate (OCR) steady at 2.5% as the "global economy still remained fragile and risks to the outlook persisted" RBNZ Governor Alan Bollard said.

David Cameron took a different view regarding the Eurozone and the Euro yesterday urging leaders to take some decisive action. Speaking at the World Economic Forum in Davos he said political leadership still has the opportunity to save the single currency with "bold and decisive action". The PM even reminded leaders just what needed to be done; "Greece, banks and firewall".

Other than the events in Davos, there was very little to get the markets excited yesterday. There was a small improvement in German consumer confidence and a fall in the CBI's retail sales measure; neither did any harm to the Euro or Sterling respectively.

In the US, durable goods orders were stronger than expected in December while new home sales were weaker. The net result was relatively modest ranges for exchange rates and minimal movement. As London opened this morning, Sterling was virtually unchanged on the day against the Euro, the US Dollar and the Swiss Franc. It is however slightly lower against the NZ Dollar following the RBNZ rate decision.

There is nothing from the UK or Eurozone this morning so all eyes will be on US fourth-quarter gross domestic product and the finalised University of Michigan consumer sentiment index. The latter should be close to 74; the former is expected to show annualised growth of 3.0% (0.7% on a quarterly basis).

More difficult to forecast is how investors would react to a figure appreciably higher or lower than 3.0%. The most recent experience is that good news from the US economy is bad news for the safe-haven US Dollar and Japanese Yen and good news for the Australian and New Zealand Dollars but the market can be fickle and that might not be the case today. Have a good weekend.