Foreign Exchange - Australia Weekly Update, Foreign Exchange - UK Daily Update - Monday, August 31, 2009 0:15 - 0 Comments
The reappointment of Ben Bernanke as the chairman at the Fed last week firmed up confidence in the economic management in the US, Interestingly, Ben Bennake was appointed during the George W Bush administration for his free market methodology for economic management and in 2004 gave a speech suggesting that the business cycle had been tamed.
Last week’s above expectation second quarter capital expenditure figures in Australia (rising 3.3% on the first quarter – compared with an expected drop of 5%) have raised expectations for this week’s second-quarter GDP data and, subsequently, many economists are now forecasting an interest rate hike by October. This week’s RBA meeting is thought to be too early for the members to act, however the tone should give an indication as to if they also think rates should move higher soon.
The Australian dollar had another good week last week but it didn’t have things all its own way. The AUD has, and continues to make gains off the back of commodity strength, positive US data resulting in risk investment, and Chinese data being above market expectation. However the latter was the AUD’s stumbling block last week as China said it will tighten approval for investment in certain ‘advanced industries’ which analysts fear could stifle their economic recovery and subsequently effect growth expectations globally. The short term effect was to diminish the strength of commodity currencies however by the end of last week the Aussie dollar was back on track and gaining in strength in expectation of good domestic figures in the coming days.
On Friday, the gains in the AUD separated itself from the usual risk appetite correlation when the AUD responded positively despite a poor performance by the US equity markets.
The week ahead in Australia
Monday 31st – Company Gross Operating Profits (QoQ), HIA New Home Sales (MoM – July)
Tuesday 01st – Building Permits (MoM and YoY), RBA Interest Rate Decision
Wednesday 2nd – GDP (QoQ and YoY)
Thursday 3rd – Trade Balance
The AUDUSD rate continues to test the highs for the year starting last week at 0.84. Midweek saw the Aussie dollar lose some ground to drop to 0.8250 however by the end of the week the peak was being tested again with 0.8450 being the high on Friday before finishing the week just a touch lower at 0.840.
The week ahead in the US:
Monday 31st – Chicago PMI
Tuesday 1st – ISM Manufacturing
Wednesday 2nd – MBA Mortgage Applications, ADP Employment Change, Nonfarm Productivity, Unit Labour Costs, Factory Orders, Fed’s Lockhart Speech, FOMC Minutes
Thursday 3rd – Jobless Claims, ISM Non- Manufacturing,
Friday 4th – Average Earnings (August), Unemployment Rate, Nonfarm Payrolls (August)
This pairing started last week at 1.9710 and lost ground on Monday and Tuesday to descend to 1.9490. Midweek saw a small recovery for the pound to push the rate back up to 1.9640 but the downward trend resumed at the end of the week to leave the rate at 1.9338.
The week ahead in the UK:
Tuesday 1st – Halifax House Prices (MoM and YoY), Mortgage Approvals, Net Lending to Individuals, PMI Manufacturing
Wednesday 2nd – PMI Construction
Thursday 3rd – PMI Services
The first part of last week went the Euros way with EURAUD rising from 1.7070 to 1.7245 but the second half of the week saw the gains surrendered and the pairing descended to finish the week at 1.6990.
The week ahead in the Eurozone:
Monday 31st – Retail Sales (Germany – MoM and YoY), CPI
Tuesday 01st – Unemployment Change and Unemployment Rate (Germany), PMI Manufacturing
Wednesday 02nd – GDP
Thursday 03rd – PMI Services, Retail Sales, ECB Interest Rate Decision
The NZ dollar continued its current form last week testing the highs for the year against several of its pairings, most notably reaching a 12 year high against the pound. Domestic economists in NZ have suggested that the NZD has fewer downside risks and more upside potential in the short term, as risk appetite and commodity prices look set to remain strong over the coming days.
Of note from last week’s domestic NZ figures was the consent for new dwellings data (excluding apartments) which rose by 11.2% in comparison to the month prior and was the highest number since last September. However the figures are still considered weak and are likely to see less growth over the coming months due to a recent rise in net migration, rising unemployment and slow wage growth.
This week is a quiet one for domestic NZ data however given that other factors are the main contributor to the NZ dollars recent moves it is unlikely to be a week without volatility. Should risk appetite remain strong then the NZD will likely prosper.
The week ahead in NZ
Monday 31st – Business Confidence
Thursday 3rd – ANZ Commodity Price
AUDNZD started and finished the week at the same level with only a small amount of movement in between. The outset of the week started at 1.2270 then the pairing descended in NZ dollars favour midweek to 1.2140 but the kiwi’s gain was reversed in the second half of the week to end back where it started at 1.2270.
GBPNZD started the week at 2.41 and descended throughout the week to hit a 12 year low at 2.3648 before regaining a small amount of ground to finish the week on 2.3750.
There was little movement for EURNZD last week – starting the week at 2.095 and finishing the week at 2.09 with a peak for the week at 2.1 and a low at 2.08.
At the start of last week NZDUSD continued the current trend of NZD strength testing the highs for the year at 0.6860. Thereafter the NZ dollar tried to break the 0.69 level on 3 occasions during the week however it was thwarted at all attempts. Nonetheless with little downward pressure (the low for the week was 0.6790) the pairing is poised to test the 0.69 level again in the coming week.
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Disclaimer: The above comments are only our views and should not be construed as advice. You should act using your own information and judgement. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgement as of the date of the briefing and are subject to change without notice.
Any rates given are “interbank” i.e. for amounts of £5million and thus are not indicative of rates offered by World First for smaller amounts.
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