NZ/Aus/S. Africa - Weekly Update - Written by renee on Monday, February 23, 2009 2:08 - 0 Comments
World First NZD/AUD Weekly Update - 23rd February 2009
NZD
It was a relatively quiet week data wise in New Zealand, nonetheless the data out continued to paint the same picture. A knife has been taken to growth expectations have been shaved for 2009 even further and the economy is now expected to contract close to 3 percent (previously 2 percent). This goes hand in hand with the unemployment rate rising towards 8 percent.
Input prices fell 2.2 percent in the December quarter, taking annual growth to 9.7 percent. Output prices rose 1.4 percent, taking annual growth to 9.9 percent. The National Bank Regional Trends for December quarter showed that total economy wide activity fell 0.1 percent – the fourth consecutive quarterly contraction.
The first National Bank Business Outlook survey for 2009 is due out on Thursday this week, this is one of the best leading gauges on the economy. The big uncertainty is whether there are any signs of recovery (or stabilisation) following many indicators within the survey hitting historical lows in December. This survey is the first important piece of economic information for the March quarter.
AUD
Speaking to the House of Representatives Economic Committee last Friday, the Governor Glenn Stevens in essence has hosed down expectations for further aggressive rate cuts by the Reserve Bank of Australia. He noted that in the first part of this year, the economy is set to weaken further and there is little that policy could do about that. But policy should start to support activity in the second half of this year.
Out last week in Australia Retail trade volumes for the December quarter printed positive, growing 0.8 percent, up from being virtually flat (+0.1 percent) in the September quarter.
All up, the 0.8 percent retail trade volumes growth is broadly consistent with our estimate of total consumer spending growth of 0.5 percent and GDP growth of 0.1 percent; they add marginal upside risk to that forecast we might just scramble to a barely positive GDP growth outcome for the quarter.
Unsurprisingly motor vehicle sales fell 1.1 percent in January, seasonally adjusted, to be down 16.9 percent over the course of the past year.
The week ahead:
NZD
Monday 23rd – Credit Card Spending (Jan)yoy
Wednesday 25th – RBNZ 2yr Inflation Expectation (Q1)
Thursday 26th – Trade Balance (Jan), NBNZ Business Confidence (Feb)
Friday 27th – New Zealand Employment Summit, Visitor Arrivals (Jan)mom, Building Permits (Jan)mom
AUD
Tuesday 24th – Preliminary BoP Imports (Jan) mom
Wednesday 25th – Construction Work Done (Q4)
Thursday 26th – Private Capital Expenditure (Q4)
Friday 27th – Private Sector Credit (Jan)mom
GBPNZD
The Bank of England’s MPC minutes revealed an 8 - 1 vote for the 50bps cut at the February meeting. The committee noted that it was no longer clear that further rate cuts would be beneficial to the economy. That is because we may be at the point where the spread between lending rates and deposit rates is being squeezed as the Bank Rate approaches zero, at which point ‘…banks may decide not to pass on cuts in Bank Rate, in order to mitigate the impact on their profitability’.
Sterling gained considerably on the New Zealand Dollar last week. The week commenced with the GBPNZD rate in the 2.74’s from there the graph curved up in Sterling’s favour with the rate climbing to end the week at GBPNZD 2.8268.
We expect offshore events and risk related flows to dominate the NZD again this week in the lead-up to the National Bank Business Outlook, which will give the first read on how Q1 is fairing.
The week ahead in the UK:
Tuesday 24th – Total Business Investment (Q4)
Wednesday 25th – GDP (Q4)
GBPAUD
Commodity currencies took a hit again last week and the Australian Dollar was no exception. The GBPAUD rate last Monday was in the 2.19’s from there it spent the rest of the week trading above the 2.20 level and closed on Friday at 2.2308. The peak of the week was on Tuesday evening when it touched just above the 2.24 level.
This week with data light from both sides we would expect that risk aversion levels again will determine movements in the rate. Possibly see Sterling make slow gains on the AUD throughout the week. For data out in the UK please refer to GBPNZD above.
EURNZD
Jitters over in Europe has seen the EUR under pressure and it fell to its lowest level since November 2008 against the US dollar as fears over the fate of Eastern European banks continued to send shivers through equity markets.
The EUR did lose ground against the NZD last week from Wednesday through to Friday moving down into the 2.45’s. It then climbed back up and closed on Friday just above the 2.50 level, the highest the rate has been since the beginning of February.
The Euro zones economic calendar is full this week and if we continue to see escalated levels of risk aversion the EURNZD rate might well remain above the 2.50 level and push up towards the 2.55’s.
The week ahead in the Euro zone:
Tuesday 24th – Germany IFO Business Climate (Feb)
Wednesday 25th – Germany GDP (Q4) qoq
Thursday 26th – Germany ILO Unemployment Rate (Jan), Gfk Consumer Confidence Survey (Mar), Euro zone Business Climate Indicator (Feb), Consumer Confidence (Feb), Economic Confidence
Friday 27th – Unemployment Rate (Jan)
EURAUD
Much like the EURNZD rate the EURAUD movements were sluggish in the first half of the week in comparison to the end. The rate opened on Monday at EURAUD 1.9628, from there it climbed to just above the 1.98 level on Tuesday before retreating back down to the 1.95’s on Thursday. The EUR then took control and the rate rose above the 1.98’s at close of play on Friday.
Again the commodity currency is most likely to surrender all rate movements to Euro and the rate could remain above the 1.98 level in the short term. For data out in the Euro zone please refer to EURNZD above.
NZDUSD
The FOMC released the minutes from the January 27-28 meeting last week. On the near-term outlook, the Minutes again highlighted that the economy had weakened further going into 2009. GDP in 2009 was forecast in the -0.5 percent to -1.3 percent range, with the unemployment rate rising to 8.5 -8.8 percent.
However the FOMC remains of the view that the economy will start to gradually recover later this year in response to the fiscal stimulus and Fed measures to support credit markets. In 2010, the FOMC sees GDP recovering to a central tendency of 2.5 - 3.3 percent, then strengthening to 3.8 – 5.0 percent in 2011.
The NZDUSD traded in 1 cent band for the majority of last week between 0.505 – 0.515 where it seems to be getting comfortable. The USD gained the most ground throughout Thursday evening pushing the rate into the 0.502’s on Friday the lowest the rate has been since the beginning of February. NZDUSD 0.51 appears to be the resistance level at present, USD is continuing to push against it and this week we might see it continue downwards and possibly break the 0.50 level as the USD remains the default safe haven currency.
The week ahead in the US:
Wednesday 25th – Consumer confidence (Feb), House Price Index (Dec) mom
Thursday 26th – Existing Home Sales (Jan) mom
Friday 27th – Initial Jobless Claims (w/e Feb 22), New Home Sales (Jan) mom
AUDUSD
Stock markets which are a barometer of expectations for global economic growth, and remain the main driver of the AUD and other commodity currencies at present has again had a bearing on the AUDUSD rate last week.
The fall last week in the S&P500 to its lowest level since its six-year low struck on November 21 last year weighed on AUDUSD which fell to a two-week low of 0.6333 last week. Should the S&P500 make a new cycle low there’s a risk that AUDUSD could continue to fall towards 0.60. For data out in the US this week please refer to NZDUSD above.
AUDNZD
Closer to home, the AUD gained some support from RBA Governor Stevens’ relatively more upbeat comments on the Australian economy. This positive sentiment filtered into the Australian Dollar which gained on the NZD throughout the week. The AUDNZD rate opened on Monday at 1.252 and closed on Friday up at AUDNZD 1.2662. The Australian Dollar seems to be getting comfortable above the 1.25 level where it could remain for the medium term, data out in Australia would have to come out very poor to see the rate break below that 1.25 floor
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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.
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.
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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