NZD
New Zealand’s external imbalances were to the fore last week, with timely reminders of the rebalancing process that needs to play out being expressed by both the RBNZ Governor Bollard in a speech, and the decision by credit rating agency Fitch to place NZ’s sovereign credit rating on negative outlook.  Bollard remarked ‘ A clear risk beyond near-term recovery is that households resume their ‘borrow and spend’ habits before bringing their debt levels back to more prudent levels.’

In second tier data out last week.  Total spending rose 0.8 percent in the month of May, while core spending rose 1.6 percent.  Headline inflation rose 0.6 percent, taking annual CPI growth to 1.9 percent, from 3.0 percent in the March quarter.

This week’s data calendar is light.  Another solid net migration inflow is expected as New Zealanders cancel or delay their migration plans.  Visitor arrivals should remain under pressure.

AUD
Firms are feeling more confident in Australia with the Business confidence Index rising 6 points to +4, the first positive number since Dec 2007. June Business conditions Index rose 12 points to -2, the highest in nine months. A pickup in sales and forward orders led to a record improvement in employment intentions with the NAB business employment index jumping a record 18 points to -7.

Australian merchandise imports fell AUD $14 million to AUD $16.28 billion in June from AUD $16.29 billion in May in seasonally adjusted terms, the Australian Bureau of Statistics said Thursday.   The bureau said that machinery and transport accounted for the largest proportion of imports in original terms and were valued at AUD $6.29 billion.

The week ahead:
NZD
Tuesday 21st – Visitors Arrivals (Jun) mom, Credit Card Spending (Jun) yoy

AUD
Monday 20th – Producer Price Index (Q2) qoq
Tuesday 21st – RBA July Board Minutes, New Motor Vehicle Sales (Jun) mom
Wednesday 22nd – Consumer Prices (Q2), DEWR Skilled Vacancies (Jul) mom

GBPNZD
In the UK last week RICS House Prices improved to -18.4 from -43.8 the best reading since September 2007 and retail sales were up 1.4 percent.  However data wasn’t all rosy with unemployment in the UK rising to its highest level since 1995.  The unemployment rate currently stands at 7.6 percent which although high compares favourably with the US and Europe who both sit at 9.5 percent.

The NZD took the news of the possible credit rating downgrade from AA+ versus AA in its pride, the GBPNZD slid last week from opening at 2.5848 to closing on Friday at 2.5346.  This is the lowest the rate has been since the first week of June.

The week ahead in the UK:
Tuesday 21st – Public Finances (Jun), Public Sector Net Borrowing (Jun)
Wednesday 22nd – Bank of England Minutes
Friday 24th – GDP )Q2) qoq / yoy

GBPAUD
Sterling lost ground against the Australian Dollar last week, slipping from 2.0760 on Monday to close trading on Friday just shy of the 2.04 level at 2.0383.  This week eyes will be on both countries with their central banks releasing minutes of the last meetings and how each economy is fearing in the current climate.

EURNZD
German economic sentiment fell in July, confirming forecasts that the country’s gross domestic product is set to decline 6% this year.   Economic expectations for the six months to come fell to 39.5 after registering  44.8 in June.   It was the first drop since October.

The 16 countries that use the euro posted a smaller-than-expected trade surplus in May as exports fell more than imports from April, data released by the European Union’s Eurostat statistics agency showed on Friday.   Non-seasonally adjusted figures showed the Euro zone’s surplus narrowed to EUR 1.9 billion in May from EUR 2.7 billion in April.  The figures showed Euro zone exports totaled EUR97.7 billion in May, down 24% on the year, while imports totaled EUR 95.8 billion, a 27 percent drop compared with May 2008. In April, Euro-zone exports totaled EUR 102.7 billion, while imports totaled EUR 99.9 billion.  The data indicates that trade remains substantially weaker than last year after the credit crisis plunged the euro zone and many of its main trading partners into the deepest recession since World War II.

The poor figures out in the Euro zone lead to the EUR depreciating against the NZD last week.  We saw the rate drop from above the EURNZD 2.22 to spend the majority of the latter part of the week trading in the 2.18’s.  This week with little out in NZ we could expect to see this pairing remain
below the 2.20 level.

The week ahead in the Euro zone:
Monday 20th – German Producer Prices (Jun) mom
Wednesday 22nd – Industrial New Orders (May) mom
Thursday 23rd – ECB Current Account (May)
Friday 24th – PMI Manufacturing (Jul), Business Climate

EURAUD
In Australia a recovery in business confidence led to the AUD making gains on Euro last week.  On Monday the EURAUD was sitting at 1.8037 from there the pairing fell off quite sharply to end Tuesday at 1.7603, from there the EURAUD rate spent the rest of the week trading close to the 1.76 level.

The economic calendar is set with an even amount of data from both sides this week, which could lead to the rate remaining around the current level with commodity currencies making gains at present.  For data out in the Euro zone please refer to EURNZD above.

NZDUSD
Globally risk appetites have improved from a solid start to the US earnings seasons, with results largely exceeding expectations amongst both financial stocks as well as non-financial stocks such as IBM, Intel and Google.  Those results outweighed Fitch putting New Zealand on negative outlook with regards to movements in the NZDUSD rate, with strength coming from the NZD.

The currency market latched on to Reserve Bank of New Zealand’s Governor Bollard’s speech, which said NZ was likely to recover ahead of the pack.  Retail sales and CPI data both exceeded expectations and the NZD tested but did not break the topside resistance level at NZDUSD 0.6550.

The week ahead in the US:
Tuesday 21st – Leading Indicators (Jun)
Thursday 23rd – House Price Index (May) mom
Friday 24th – Initial Jobless Claims (w/e Jul 19), Existing Home sales (Jun)

AUDUSD
After falling away the week prior to last the AUD made back the ground it had lost.  It was a slow but gradual climb from the Australian camp as the rate climbed from opening on Monday at 0.7738 to close up on Friday at 0.8016.   The commodity currency gained on the back of positive sentiment emerging on the global markets with risk appetites improving with the strong start to the US earnings season.  For now range trading seems the most likely scenario as the market respects offshore sentiment and has insufficient domestic news to deliver a strong trend lower.  For data out in the US this week please refer to NZDUSD above.

AUDNZD
Movements between the Australian and Kiwi Dollar were not so clear cut last week, the rate spending the duration of last week hovering around the 1.24 level.
With a very light domestic data calendar this week, the NZD market finds itself hostage to offshore movements and we are likely to see current trading ranges persist.  Australia has the RBA Minutes and CPI which could lend support to the AUD.

___________________________________________________________________________________________________________

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.

If you would like to discuss your foreign exchange requirements then please don’t hesitate to call our Southern Hemisphere Office on our New Zealand Free phone number  0800 666114 , or Australian Free phone number 1800 701540.

Please reply with REMOVE in the subject of your e-mail if you would like to be removed from our mailing list.

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.