NZD
The latest National Bank Business Outlook confirmed the parlous state of the New Zealand economy. It showed that headline business confidence fell 6 points to -41.  Other activity gauges remain at, or near historical lows.   In short, business profitability is being eroded as the recession deepens resulting in substantial cuts in investment and an increasing number of layoffs.

In other data out locally last week credit card spending for February showed a 1.7 percent rebound following the 2.2 percent decline the previous month.  Credit growth in January showed total household claims rose by 0.1 percent, following growth of 0.2 percent in December.  Also in January residential consent issuance fell 13.1 percent to be down 53.4 percent from a year ago.

Looking to the week ahead, it is a rather a quiet one locally but a busy one across the Tasman.

AUD
In Australia construction work done for Q4 came in stronger than expected up 1.7 percent alongside Private Capital Expenditure and Private Sector Credit for January coming in stronger than expected.

All focus this week will go to the RBA decision and Australian Q4 GDP release on Wednesday.

The week ahead:
NZD
Wednesday 4th – RBNZ Governor Bollard appears before Select Committee, ANZ Commodity Price (Feb)

AUD
Tuesday 3rd – Current Account Balance (Q4), Retail Sales (Jan) mom, RBA Cash Rate Target
Wednesday 4th – Gross Domestic Product (Q4) qoq/yoy
Thursday 5th – Trade Balance (Jan), Building Approvals (Jan) mom
Friday 6th – AiG Performance of Construction Index (Feb)

GBPNZD
Good news out last week in the UK showed that consumer confidence figure rose by 2 points to -35 as many consumers surveyed believed that the economic situation will be better in 12 months time.  In other news GDP for Q4 came out in line at -1.5 percent.

Last week the GBPNZD rate swung both ways of the 2.80 resistance level.  Leading up to mid week the New Zealand Dollar pushed the rate down into the mid 2.78’s, from Wednesday onwards Sterling made all the gains pushing up to close play on Friday at GBPNZD 2.8495.

Yesterday Sterling continued its gains off the back of the volatility in the financial services sector in the UK, US and EU, reaching the highest levels thus far for 2009 at GBPNZD 2.8697.

The week ahead in the UK:
Tuesday 3rd – Current Account Balance (Q4)
Wednesday 4th – Nationwide Consumer Confidence (Feb), PMI Services (Feb), Official Reserves (Changes)(Feb)
Friday 6th – Band of England Interest Rate Announcement, PPI Input/Output (Feb) mom

GBPAUD
Last week the GBPAUD rate mirrored the movements of the GBPNZD pairing.  The rate slid down to the low of the week on Wednesday at GBPAUD 2.1897, from there Sterling steadily climbed against the Australian Dollar and ended the week at 2.2304. There has been a large fall in the correlation between currencies and stock market/risk-appetite in February of this year.  Interest rates (or relative prospects for economic growth) have become more important drivers of currencies in February.  On the back of that data we might see some volatility at the later part of this week due to the interest rate announcement in the UK and surrounding the announcement in Australia.  For data out in the UK please refer to GBPNZD above.

EURNZD
In an update on Q4 GDP, it was revealed that the German economy’s contraction of 2.1 percent was almost wholly due to a 2.0 percent net export detraction as the German export machine ground to a halt.

More recent reading remains equally sober and point to the contraction continuing into Q1 if the February Ifo survey is any indicator.  The survey proved weaker than anticipated by markets with the headline business climate index slipping from 83.0 to 82.6, a new record low.  Although the expectations component recorded a second consecutive monthly rise from its December record low, we suspect that the improvement in expectations reflects just how savage the current downturn has been; companies hope for an improvement because the present is so dire.

The Euro gained in a controlled manner against the New Zealand Dollar last week.  The EURNZD rate commenced the week at 2.4885 and closed at 2.5355, dipping on Wednesday for the low of the week at 2.4786.  This week EUR has spiked and broke the 2.55 level on Monday, question is how long will it be able to maintain its presence in above the 2.50 level.

Data out in the Euro zone this week:
Wednesday 4th – PMI Services (Feb)
Thursday 5th – GDP (Q4) qoq
Friday 6th – ECB Announces Interest Rates

EURAUD
Movements were made from both sides last week in this pair.  The Australian Dollar started the week off strong pushing the rate down to the low of the week on Wednesday at EURAUD 1.9537, from there EUR took the wheel and drove the rate home to close on Friday at 1.9851.
This week the Euro has again started off strong and we may see some volatility surrounding the interest rate decision in the Euro zone on Friday.  For data out in the Euro zone this week please refer to EURNZD above.

NZDUSD
Revealing that the Budget deficit would be $1.73 tr this financial year (at 12.3% of GDP, the largest deficit since WWII), the President was also endeavouring to focus attention on measures to reduce the medium term size of the deficit.  He pledged to reduce the nominal size of the deficit within the next four years (i.e. during this Administration) and spelled out some measures that would be employed to address that task.

These include cutting down in health spending and increasing taxes for higher income earners, re-introducing the higher 36%/39.6% top two marginal tax rates in 2011, up from their current 33%/35% levels.

New Zealand Dollar touched on six-year lows against the greenback yesterday as the USD soared to a three-year high against a basket of major currencies.  On opening today the US Dollar had managed to hold its gains and was still trading below the 0.50 level.

Data out in the US this week:
Tuesday 3rd – Personal Income (Jan), Personal Spending (Jan), Construction Spending (Jan) mom
Wednesday 4th – Pending Home Sales (Jan) mom
Thursday 5th – ADP Employment Change (Feb)
Friday 6th – Initial Jobless Claims (w/e Mar 1), Continuing Claims (w/e Feb 22)

AUDUSD
Last week it was a gradual decent in the favour of the USD, the rate slid to 0.6369 on Friday.  At opening yesterday the USD had managed to dip lower and spent the day hovering in the low AUDUSD 0.63’s.  With quite a substantial move under its belt for the USD and further data out this week expected to be negative in the United States we might well see the rate correct and come back up towards the 0.65 level before the week is out.  For data out in the US this week please refer to NZDUSD above.

AUDNZD
The Australian Dollar didn’t relent its hold on the rate last week and it continued its north bound journey.  The week commenced the week on Monday at AUDNZD 1.2630 and rose to 1.2772 by close on Friday.  If we were going to be followers of trends I would see this pair climbing slightly this week and possibly touching on the 1.29 level.

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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.