NZD
2008 has finally come to a close with data released last week in New Zealand, the economy remains in recession, and while a 0.9 percent contraction in GDP is hardly something to cheer about, the economy hasn’t fallen off a cliff either.

Other local data released last week was the Westpac McDermott-Miller Consumer Confidence for the March quarter, pessimists again outnumbered optimists with the index falling by 5.3 points to 96.0.  Balance of Payments for the December quarter showed that the seasonally adjusted current account deficit improved by $236m to $3,772m.  The annual deficit widened from 8.6 to 2.9 percent of GDP.  GDP December quarter, the economy contracted by 0.9 percent in the quarter, with annual growth falling to -1.9 percent.  And last but not least overseas merchandise trade for February showed a trade surplus of $489 million was recorded.  In the year to February, exports fell 6.6 percent, while imports tumbled 14.2 percent.

AUD
With little data out in Australia apart from the Conference board leading index for January which came in at -0.6% this week proves to be busier on the data front.  Poor figures will add fuel for a interest rate cut from the Reserve bank of Australia next Tuesday the 7th April, consensus is that we will see a 25 basis point cut.

The week ahead:
NZD
Monday 30th – Building Permits (Feb) mom
Tuesday 31st – NBNZ Business Confidence (Mar)
Thursday 2nd – ANZ Commodity Price (Mar) mom

AUD
Monday 30th – HIA New Home Sales (Feb) mom
Tuesday 31st – Private Sector Credit (Feb) mom
Wednesday 1st – Retail Sales (Feb) mom, Building Approvals (Feb) mom
Thursday 2nd – Trade Balance (Feb)

GBPNZD
In general the data out in the UK last week came in stronger than expected.  CPI for February showed an unexpected rise, imports have become more expensive with the fall in Sterling over the past 8 months and retailers have passed this increase cost onto consumers.   Retail sales came in out at -1.9 percent against an expected -0.4 percent.

The NZD benefited from an increase in rate differentials over the past week.  Current account and GDP are both behind us suggesting the NZD will be more affected by global themes than domestic.  Yield differentials support the NZD as risk appetite improves tentatively.

There were significant movements in the GBPNZD rate last week with Sterling taking control the early part of the week climbing to the peak of the week on Wednesday of GBPNZD 2.6252.  From there on out movements were dominated by the NZD, the rate traded down to 2.4976 at one point on Friday.  This week could prove challenging for Sterling to recoup some of the lost ground in saying that we might have seen the rate bottom out at the GBPNZD 2.50 resistance level and now pick itself up going forward.

The week ahead in the UK:
Monday 30th – Hometrack Housing Survey (Mar) mom, Mortgage Approvals (Feb)
Tuesday 31st – Gfk Consumer Confidence Survey (Mar)
Wednesday 1st – PMI Manufacturing (Mar)
Thursday 2nd – PMI Construction (Mar)

GBPAUD
It was an even balanced battle between the Australian Dollar and Sterling last week with the rate ending more or less where it began the week on Monday.  At opening the GBPAUD rate was just shy of the GBPAUD 2.07 level it then climbed to weeks high on Tuesday of 2.11, its life at that level was short lived as it quickly fell away  to end the week trading at GBPAUD 2.0564.

With similar amounts of data out from both sides this week look it would take a shock result to fuel movements and we could see a standstill in the GBPAUD rate this week. For data out in the UK this week please refer to GBPNZD above.

EURNZD
The NZD pushed higher last week as several drivers combined to support it.  Risk appetite improved as global equity markets staged a strong rally over the week.  A large sell off in the NZ rates market has seen yield differentials move in the NZD’s favour across all currency pairs and key local data came out slightly better than market expectations.

The EUR which recently has been highly correlated with the NZD does not look as rosy and the FX market is convinced the ECB will need to begin quantitative easing as well.  This week eyes will be on the interest rate decision in the Euro zone on Friday, consensus is that they will cut a further 50 basis points bringing down the rate to 1 percent.

The week ahead in the Euro zone:
Monday 30th – Economic (Mar)
Tuesday 31st – Germany ILO Unemployment Rate (Feb), Unemployment Change (Mar)
Wednesday 1st – PMI Manufacturing (Mar)
Friday 3rd – ECB Announces Interest Rates

EURAUD
The commodity currency put up a fight last week and continued to gain against Euro.  The EURAUD began the week at 1.94, rose above the 1.95 level on Wednesday then fell away from there, closing the week at the low of 1.9187.

The most significant piece of data out this week is the interest rate announcement on Friday in the Euro zone.  With a 50 basis point cut expected from the ECB that could fuel the EURAUD to move further in Australian Dollars favour.  For data out in the Euro zone please refer to EURNZD above.

NZDUSD
NZD now remains at ‘inflated’ levels but with yield differentials moving strongly in NZ’s favour, some genuine signs of life in the housing market, dairy prices comfortably off the lows and posting gains for the month helped with the climb the NZD had last week against the US Dollar.

Movements were predominantly in New Zealand Dollars favour, with the NZD performing the strongest it has against the USD since early January.  With stronger than expected data out locally in New Zealand coupled with the quantitative easing stance in the US the rate climbed to a high of the week on Thursday at NZDUSD 0.5794 before retracing slightly to close on Friday at 0.5714.

With data out this week on business confidence in New Zealand and consumer confidence in the states we could see the picture is a little rosier in New Zealand at present and a continued climb by the NZD or little movement at all.

The week ahead in the US:
Wednesday 1st – Consumer Confidence (Mar)
Thursday 2nd – ADP Employment Change (Mar), Pending Home Sales (Feb) mom, Construction Spending (Feb) mom
Friday 3rd – Initial Jobless Claims (w/e Mar 29)

AUDUSD
0.7050 provided solid resistance for the AUDUSD rate last week as the rate has appreciated 11 percent since the second week of March it would take a fresh catalyst to spur the Australian Dollar to continue its gains on the USD further this week.

Head of Economic Analysis at NAB, Anthony Richards suggested that Australia was not likely to suffer a US-like housing crash, while the Financial Stability Review said the “Australian banking system is considerably better placed to weather the current challenges than many other systems around the world”.   Coupled with the increase price in commodities in Australia (Copper rose 4.5 percent alone last week) and the Australian Dollar could well push higher still.  For data out in the US please refer to NZDUSD above.

AUDNZD
Another week and still more movement from the New Zealand Dollar camp last week, the rate moved to the lowest level it has been since the middle of January this year of AUD 1.2092.  The key piece of data out in New Zealand this week, Business confidence released on Tuesday could lead to some volatility in the rate and movements up back into the 1.23 level for the Australian Dollar.

___________________________________________________________________________________________________________

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.