NZD
Locally it was a relatively quiet week in terms of domestic economic developments last week here in New Zealand. 

Migration inflows accelerated further and are running at an annualised rate of 16,520 people in the March quarter, equivalent to 0.4 percent of the population.  Conversely, credit card spending recorded a sharp 3.1 percent decline, to be down 5.0 percent from a year ago – reinforcing that households remain under pressure despite disposable income boosts from tax cuts and lower mortgage rates.

 

The Reserve Bank of New Zealand official cash rate decision takes centre stage here in New Zealand this Thursday.  A 50bp cut is widely expected to bring the interest rate down to 2.50 percent.

 

AUD
Last week’s release of the April Reserve Bank of Australia’s Board minutes noted that the “near term outlook for demand and output in Australia was now weaker than earlier expected” following the generally weak run of data during the month of March.  The RBA revised down its growth and inflation forecasts, with GDP now forecast to decline in 2009, meaning “stronger downward pressure on medium-term inflation than previously forecast.”

 

Although conditions and sentiment in global financial markets have gradually improved, the RBA acknowledged that another weak outcome of growth was expected in the March quarter.  Building activity is expected to remain weak in the first half of this year, investment plans have been scaled back, and further rises in unemployment are expected.

Australia’s official headline inflation rate rose 0.1 percent in Q1 after falling 0.3 percent in Q4, now the headline rate is within the RBA’s 2-3 percent target range.

 

The week ahead:
NZD
Wednesday 29th – Trade Balance (March), NBNZ Business Outlook (Apr)
Thursday 30th – RBNZ Official Cash Rate, Building Permits (Mar)

AUD
Thursday 30th – HIA New Home Sales (Mar)mom, NAB Business Confidence (Q1)

 

GBPNZD
Last week in the UK The Budget highlighted the savage deterioration in public finances caused by the credit crunch.  The only real surprise result was the increase in income tax rates to 50 percent.  The government is hoping to generate growth towards the end of this year through a mixture of investment incentives and support for specific industries.

The Debt Management Office expects to issue a record £241.6 billion of government debt this year through £220 of gilt sales and £21.6 billion of Treasury Bill sales.  Gilt yields have already risen in response to that announcement as markets fear that there could be some problems in digesting that amount.

 

The GBPNZD rate last week didn’t move distinctly in either direction, merely continued to range trade between 2.58 – 2.63 band.  Leading up to the interest rate decision in New Zealand on Thursday could mean some movement in Sterling’s favour, with it possibly testing the 2.60 level.

 

The week ahead in the UK:
Monday 27th – Bank of England Release Quarterly APF Report
Thursday 30th – Gfk Consumer Confidence Survey (Apr)
Friday 1st – Net Consumer Credit (Mar), Mortgage Approvals (Mar)

 

GBPAUD
With the poor data released last week in Australia and the RBA revising its growth forecasts down for GDP in 2009 the Australian Dollar took a mild turn for the worst again against Sterling last week.  The rate ended the week at the same point where it began which was around the 2.054 level.  The Australian dollar made a climb on Tuesday up towards the 2.09 level the high point of the week from there it was a slide back down in Sterling’s favour.  For data out in the UK this week refer to GBPNZD above.

 

EURNZD
The New Zealand Dollar made up some slight ground against the Euro last week.  The week commenced with the rate just below the EURNZD 2.30, the NZD then gained about 4 cents on Monday and managed to retain those gains through to the end of the week closing on Friday at EURNZD 2.335.

Some stronger than expected results out in the Euro zone last week, in amongst the results was the German ZEW economic sentiment index which surprised on the upside in April, rising from -3.5 to +13.0. 

This week the New Zealand Dollar could take a tumble leading up to the interest rate decision on Thursday, we could see the rate move back towards the EURNZD 2.30 level. 

 

The week ahead in the Euro zone:
Wednesday 29th – Business Climate Indicator (Apr), Economic Confidence (Apr)
Thursday 30th – Germany ILO Unemployment Rate (Mar), Unemployment Rate (Apr)

 

EURAUD
The new found lower levels of April continued last week for the EURAUD rate with the pairing hovering between the 1.82 – 1.85 band for the majority of the week. Industrial Orders and Economic sentiment for the Euro zone came in stronger than expected last week, preventing the Euro from sliding further against the Australian Dollar. 

This week with no surprises on the cards from either side we may continue to see the rate trade in the 1.83 – 1.85 band with little movement.

 

NZDUSD
On the data front in the US last week both the jobless claims and existing home sales reports provided some hope that the US economy’s pace of decline has eased off in March and April.  Jobless claims were up 27k to 640k, so far this month’s claims have averaged 638k down from 660k in March.

The New Zealand Dollar weakened slightly against the USD last week, the rate lest ground and spent most of its time in the NZDUSD 0.55’s, climbing slightly on Friday to close at 0.5643.

 

The week ahead in the US:
Wednesday 29th – Consumer Confidence (Apr), Richmond Fed Manufacturing Index (Apr)
Thursday 30th – GDP (Annualised Q1), FOMC Rate Decision
Friday 1st – Personal Income (Mar), Personal Spending (Mar), Initial Jobless Claims (w/e Apr 26)

 

AUDUSD
The USD took a sharp fall of 3 cents against the AUD at the beginning of last week off the back of a 4.25 percent slide in the S&P 500, after that movement the AUDUSD spent the rest of the week range trading between 0.69 – 0.71 band.

It is likely that the AUDUSD rate will remain bound to these current levels until a clearer picture of the global economic outlook emerges.  For data out in the US this week please refer to NZDUSD above.

 

NZDAUD
It is difficult to see the RBNZ doing anything that will support the currency in its interest rate decision on Thursday, given that they have openly stated longer-term yields are too high and need the New Zealand Dollar to weaken to aid in the recovery of the current account.  Having said that, it is likely we will see this rate continually slowly in the Australian Dollars favour with a climb above and beyond the 1.27 level over the next coming weeks and possibly months. 

______________________________________________________________________________________

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.

 

 

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