NZ/Aus/S. Africa - Weekly Update - Written by renee on Monday, September 1, 2008 2:00 - 0 Comments
World First NZD/AUD Weekly Update - 1st September
NZD
After contracting over the first half of this year, the economy looks to be tentatively finding a base. The August National Bank Business Outlook (NBBO) survey is the latest piece of evidence pointing to a stabilisation in economic conditions. Headline business confidence rebounded, indicators within the survey (profit, investment and employment intentions) also showed mild improvement, but remain in negative territory. Export intentions rose to the highest level since November 2007.
While the recovery in business sentiment is welcomed, other data during the week provided a reality check. The July building consents showed a 4.7 percent rebound, but this was well below the bounce expected.
Even as the RBNZ embarks on the easing cycle the RBNZ’s expectation survey is another reminder (following recent strong PPI data) that inflation concerns remain. The key 2-year ahead inflation expectations measure was 3.0 percent (top of the target band) from 2.9 percent in the prior quarter.
In other local data released last week Food Price Index (July) Food prices rose by 0.6 percent, taking annual growth to 7.6 percent and household credit growth grew by 0.3 percent in the month of July.
AUD
In Australia housing credit growth remained at its trend of 0.5 percent per month, while other personal credit fell again in July by 0.7 percent. Other personal credit has declined in four of the first seven months of this year; annual growth is back to 3 percent.
Business credit growth was 0.7 percent, up from 0.4 percent in June and right in line with average monthly growth since the start of the year and underlying annualized growth in single digits. Construction work done in the second quarter was down 2.6 percent a result that was weaker than expected. Bottom line these results are indicative of restrictive financial conditions and a slowing economy.
Focus will be on the RBA’s interest rate decision tomorrow. A 25bp cut is largely seen as a done deal, with the main question over whether a follow up move will be signaled.
The week ahead:
NZD
Wednesday 3rd – ANZ August Commodity Price Index
Friday 5th – Wholesale Trade Survey (June)
AUD
Tuesday 2nd – Building Approvals (Jul), RBA Interest Rate Announcement
Wednesday 3rd – GDP (2Q)
Thursday 4th – Trade Balance (Jul)
GBPNZD
Last week in the UK the Nationwide published details of the housing market in the month of July and prices are down 10 percent over the year, 300,000 people are now believed to be in negative equity and expectations are of that figure to quadruple. The government is now sounding out opinions to allow town halls to take an equity stake in homes for first-time buyers as a means of easing the pressure.
This data was reflected in the rate, at opening the rate was at GBPNZD 2.612 on Tuesday Sterling making a move upwards to reach the high of the week GBPNZD 2.662 only to trade lower for the remainder of the week and ending trading on Friday in the GBPNZD 2.59’s.
The big news this week is the Bank of England announcement but with the almost certainty of a hold we may have to look at other information to be market movers. With data out in New Zealand of second tier in nature we may continue to see the rate trade in the lower level band of GBPNZD 2.59 – 2.63.
The week ahead for the UK:
Wednesday 3rd – Nationwide Consumer Confidence (Aug)
Thursday 4th – Band of England Interest Rate Announcement
GBPAUD
Again as with the GBPNZD rate Sterling did not come out on top last week against the Australian Dollar. The week began with the rate at GBPAUD 2.134, Sterling gaining on Tuesday to hit the peak of the week GBPAUD 2.156 then to depreciate for the rest of the week trading at GBPAUD 2.12 at close of play on Friday.
With the negative sentiment still out in the UK, the Chancellor in an interview left the prospects for the UK economy dark and said that the UK economy might be in the worst downturn for 60 years. Sterling as with the New Zealand Dollar may continue to trade in these lower levels this week and stay within the GBPAUD 2.11 – 2.14 range. For upcoming UK data please see GBPNZD above.
EURNZD
Euro was hit last week by a poor German Business Confidence figure. The IFO release was a lot lower than expectations and saw the index plummet to a 3 year low. The German economy contracted in the second quarter of this year and with the downwards trend continuing unabated a Euro zone wide negative GDP figure for Q3 is looking probable.
EURNZD opened last week in the EURNZD 2.08’s and rose 4 cents on Tuesday to the high of the week EURNZD 2.12 to then retract slightly and spend the rest of the week trading between the range of EURNZD 2.09 – 2.105. This week the big data out is the ECB Interest Rate announcement we may well see the rate climb leading up to the announcement on Thursday possibly into the EURNZD 2.12 – 2.13’s.
The week ahead for the Euro zone:
Monday 1st – Germany Retail Sales (Jul)
Tuesday 2nd – PMI Construction (Aug)
Wednesday 3rd – Euro-zone Retail Sales (Jul)
Thursday 4th – ECB Interest Rate Announcement
EURAUD
The Euro faired a lot better against the AUD last week than it did the New Zealand Dollar. Opening play on Monday at EURAUD 1.70 to gradually climb on Tuesday and Wednesday to EURAUD 1.716 before dipping away on Thursday, making up some of the ground on Friday to close at EURAUD 1.712.
With interest rate decisions for both currencies this week, we may well see the rate continue in the current levels of EURAUD 1.71 – 1.72. For upcoming Euro zone data please see EURNZD above.
NZDUSD
Last week US consumer confidence rose for the 3rd month in a row with most people polled seeing petrol prices fall and inflation concerns abate slightly. It was not all good news however as the influential Case-Shiller house price index declined.
NZDUSD not showing a lot of movement last week trading within a cent band, opening on Monday at NZDUSD 0.705 to fall on Tuesday to the low of the week 0.6915 to climb back up and close on Friday at 0.7044.
The US has an array of data being released the latter part of this week, we might see the USD push against the NZD and possibly test the NZDUSD 0.69 resistance level.
The week ahead for the US:
Wednesday 3rd – ISM Manufacturing (Aug)
Thursday 4th – factory Orders (Jul)
Friday 5th – ADP Employment Change (Aug), Non-Farm Productivity (Q2), Initial Jobless Claims (w/e Aug 31)
AUDUSD
The AUDUSD rate began the week last week at AUDUSD 0.867 falling on Tuesday to AUDUSD 0.851 and then climbing to end trading on Friday at AUDUSD 0.864. This week with the Interest Rate decision out in Australia and numerous data out in the US later on in the week we may see the rate continue down in the AUDUSD 0.85’s in the beginning of the week and possibly retract to the 0.86 level towards the end of the week. For data out in the US this week please see NZDUSD above.
AUDNZD
With Consumer Confidence in New Zealand finally having a positive turn around for the first time in 2008 the NZD held tight against the AUD last week. Opening on Monday at levels we have been seeing for the past couple of weeks in the AUDNZD 1.224, the AUD then rose on Tuesday to the high of the week AUDNZD 1.236 to decline and end the week where it started back at AUDNZD 1.224.
The ball is in Australia’s court this week with the interest rate decision on Tuesday, market consensus is that the Reserve bank of Australia will cut interest rates by 25bp. If the market has not already priced in a cut we may see the NZD push against the AUD and trade closer towards the AUDNZD 1.20’s.
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Please feel free to contact me (renee.doughty@worldfirst.com) if you have any questions or thoughts regarding these updates or if you are interested in a particular event in the calendar.
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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. E&OE. Definitions of jargon/market terms can be found in our Glossary of Foreign Exchange Terms.
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