NZD
Big news last week came as no surprise when the Reserve Bank of New Zealand cut the Official Cash rate here in New Zealand by an expected 50bps, bringing the rate down to 2.50 percent.  “Recovery can be a long and rocky road” is what Dr Bollard said at the interest rate decision.  The RBNZ also expect positive growth rates from H2 2009, but “we need to remember, that is going to be activity that won’t be that obvious to the general public because it is going to come at a time when unemployment I still increasing.”

The monthly survey of business confidence showed a net 15 percent of businesses expected deterioration in business conditions over the next year.  Though negative, this is a substantial improvement on March’s result which found 39 percent expected deterioration.   More importantly firms’ own activity expectations rose from a net 21 expecting a deterioration in their own prospects in March to a net 4 percent – the largest improvement since February 1993.

Total residential consents fell 4.6 percent.  Excluding apartments, consents fell 1.3 percent in March.  The March overseas merchandise trade showed a monthly surplus of $3274 million was recorded.  The annual deficit improved from $5,162 million to $4,796 million.

AUD
The Reserve Bank of Australia meets on Tuesday and market consensus is that the outcome of the meeting will be very close to a 50/50 call on whether they cut further or sit tight for the time being.

The week ahead:
NZD
Tuesday 5th – ANZ Commodity Price (April)
Thursday 7th – Unemployment Rate (Q1)

AUD
Monday 4th – House Price Index (Q1) qoq, ANZ Job Advertisements (Apr) mom
Tuesday 5th – Building Approvals (Mar) mom, RBA Cash Rate Target Announcement
Wednesday 6th – Retail Sales (Mar) mom, Trade Balance (Mar)
Thursday 7th – Unemployment Rate (Apr)

GBPNZD
Nationwide house prices fell by 0.4 percent in April, stronger than an anticipated fall of 1.9 percent.  Consumer confidence came close to expectations at -27 in April an improvement from the March figure of -30.

The GBPNZD rate extended the band that it has been trading in the previous weeks and spent last week ricocheting between 2.57 and 2.626, Sterling benefited off the back of some stronger than expected results and looks to be testing the 2.60 level at present and pushing higher. 

This week it is expected that the Bank of England will keep the interest rate unchanged at 0.50 percent, attention will be paid to the statement surrounding the decision and the indications on how long the rate will stay down at this low level.  A move of the trading band in Sterling’s favour could take place again this week with the ebbing further above the 2.60 level.

The week ahead in the UK:
Tuesday 5th – PMI Construction (April)
Wednesday 6th – Nationwide Consumer Confidence (Apr)
Thursday 7th – Bank of England Interest Rate Announcement
Friday 8th – PPI Input/output (April) mom

GBPAUD
With little of interest out from both the UK and Australia last week the rate reflected this with little change.  The GBPAUD meandered from the high of the week on Tuesday of GBPAUD 2.08 down to the 2.017 low of the week on Thursday.  This week could prove to be a repeat of last week with the rate averaging out at around the 2.05 level for the duration of the week.

Interest rate decisions from both countries take centre stage with both anticipated to hold rate as they are.  For data out in the UK please refer to GBPNZD above.

EURNZD
Job figures released in Germany last week showed that unemployment is still rising with a 7.6 percent result in April versus March’s figure of 7.4 percent.  The Euro zone as a wholes reported its unemployment figure at 8.9 percent an increase from 8.7 percent in March.  On the upside consumer confidence came in stronger at 67.2 as opposed to the previous 64.7 result.

Movements again quite minimal between the Euro and the New Zealand neither finding its footing against the other the rate bounced to a fro between 2.30 and 2.35 last week. 

There is an interest rate decision in the Euro zone on Thursday this week, market has not written off a 25bp cut this time round.  With that in mind we could see the EURNZD rate at the lower end of last week’s band and could see the rate trade closer to the EURNZD 2.30 level.

The week ahead in the Euro zone:
Monday 4th – Germany Retail Sales (Mar) mom, PMI Manufacturing (Apr)
Tuesday 5th- PPI (Mar) mom
Wednesday 6th – PMI Services (Apr), Retails Sales (Mar) mom
Thursday 7th – ECB Interest Rate Announcement

EURAUD
The EURAUD hit a six month low of 1.7985 last week.  The Australian economy being a major commodity exporter and its reliance on foreign capital to fund investment means the Australian Dollar is a barometer of sentiment towards global economic growth and an indicator of appetites for cross-border investment this reflects, the rosier data out last week helped the Australian Dollar take some ground back from the Euro. 
This week could mean further moves from the Australian Dollar, especially if the reserve Bank of Australia takes a holding stance on the interest rate there.  For data out in the Euro zone please refer to EURNZD above.

NZDUSD
Despite a 50bp cut and very dovish statement from the RBNZ, the New Zealand Dollar stayed above 0.57 last week. Whereas in the US the interest rate level remained on hold at 0.25 percent after the FOMC interest rate decision.

The one very poor release for the week was US GDP, which fell at a 6.1 percent annualised pace in Q1 (median was -4.7 percent) after the 63 percent decline in Q4. Consumption rose 2.2 percent (annualised), but investment collapsed – both residential and non-residential down 38 percent (annualised) – detracting 8.8pps from growth. 

The New Zealand Dollar ended up gaining on the USD last week ending the week above the NZDUSD 0.57 level.  Leading up to the interest rate decision in New Zealand the rate was mildly volatile with a brief dip in to the mid 0.55’s on Tuesday.  Despite the RBNZ’s efforts to coerce the New Zealand Dollar into lower levels this week we might see the NZDUSD rate trade slightly higher from lasts testing the NZDUSD 0.58 level.

The week ahead in the US:
Tuesday 5th – Pending Home Sales (Mar)mom, Construction Spending (Mar)mom
Thursday 7th – ADP Employment Change (Apr)

AUDUSD
The FOMC statement reaffirmed their March 18 line saying “The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”

The AUDUSD rate traded up to a six month high of 0.738 on the final day of April, having gained almost 5 cents over the month.   For data out in the US this week please refer to NZDUSD above.

AUDNZD
Tuesday’s RBA decision is the key event this week with the market confident of no change.   That in mind the recent Australian Dollar strength may well continue this week with the AUDNZD rate sitting comfortably above the 1.25 level.

Australian employment data later in the week may yet cause market perception of the RBA policy outlook to change from its current on-hold stance.

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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.