NZD
In the week gone by the main attention economically speaking was the Reserve Banks meeting on Thursday.  As has been widely broadcast they decided to keep the OCR on hold – however the sentiment surrounding the meeting was negative.  In it’s Monetary Policy statement the RBNZ slashed its growth forecasts and raised the prospect of a rate cut by year-end – despite forecasting inflation to reach 4.7% later this year.  The forecast rate cut or ‘Easing Cycle’ has by the majority of economists been scheduled to occur later this year with the smart money still on a Sept to Nov time frame.  The NZD depreciated in value off the back of Thursdays release against the majority of its currency pairings notably hitting a seven year low against the AUD.

AUD
We saw the AUD hold strong with Australian GDP data last week confirming that the economy is not slowing as fast as the RBA were expecting.  Company Operating Profit and Building approvals statistics also came in stronger than the market had forecasted.  On the flip side of those results the Australian construction activity worsened for the third straight month in May due to higher interest rates, tighter liquidity and lower confidence levels.  Housing Industry Association chief economist Harley Dale said the survey reinforced the fact that the impact of higher interest rate, food bills, and fuel costs is only beginning to bite in earnest in the June 2008 quarter.

The main release for Australia last week was the RBA meeting on Tuesday – interest rates were kept on hold. However, the RBA delivered a less Hawkish than expected statement.  Their forecast is that demand will moderate and they will hold to a no change in rates conditional on such continued moderation in demand.
The week ahead:

NZD

A quiet week data wise with the main feature being Retail Sales for April coming out on Friday 13th – If a weaker than expected figure is released then this could put the NZD even more on the back foot.

AUD

Tuesday 10th – Home Loans, Investment Lending and National Bank Business Conditions data is released.  On Wednesday Westpac releases its Consumer confidence report and on Thursday the main AUD data for the week: employment and unemployment figures for May – (the April figure was up and the market is anticipating a similar figure to be released this week).

Friday 13th RBA Governor Stevens is speaking in Melbourne
GBPNZD

Traded higher at end of last week after the Reserve bank meeting on Thursday – Started the week at GBPNZD 2.50 and finished at 2.56.  The rate has continued this week at similar levels (2.56) so has maintained its position over the weekend at the higher end of its trading band.  This week sees a busy start on the UK data front – Monday has PPI and RICS House Price data, Tuesday Industrial and Manufacturing Production data and late on there is the NIESR GDP estimate for May.  Wednesday sees the release of Average Earnings and the Trade Balance for April.  If Sterling retains strength during the data released at the beginning of this week we might see GBPNZD test the upper limits of the trading band (2.47 – 2.57) if the New Zealand retail sales figures for April at end of the week come out badly.  However if data on the UK side is poor then we can expect the rate to continue in its current band and sit just above the 2.5 mark.

GBPAUD

Traded down towards the end of the week – AUD maintained strength off the back of the RBA keeping interest rates on hold, hitting the week low on Wednesday of 2.0297 after reaching the high of 2.0680 on Tuesday. Potential market movers this week for the AUD is the employment and consumer confidence data to be released this week. A strong employment report this week will certainly add to the case of another rate hike.  If Australian data comes out strong Sterling will be kept on the back foot and will continue to trade in the mid to low 2.0’s.

EURNZD

Towards the end of last week the Euro strengthened with the hint that there will be an interest rate rise in Eurozone in July and coupled with the RBNZ’s negative statements on Thursday we saw the rate climb back above 2.00 having started the week at 1.97.  For the past couple of months EURNZD has been trading in a tight band between 1.97 – 2.03 however we have now pushed to higher levels.  With the start of the new week we have seen EURNZD climb to the high for 2008 (2.05+).  The main data this week in the Eurozone is Monday’s German Trade Balance for April, Thursday’s ECB monthly report, and Friday’s German CPI.  If the figures in the Eurozone don’t disappoint then we expect the rate to continue to test the support levels.

EURAUD

AUD seemed to gather some momentum against the Euro earlier on in the first part of the week gaining some strength after the positive GDP data, the rate hitting a low for the Euro of 1.6047, close to the figures we were seeing in February of this year.  The latter part of the week saw the Euro claw back over a cent against the AUD, supported by Trichet suggesting there may be an interest rate hike to 4.25% in July in the Eurozone.  Main data released this week is the German trade balance on Monday, Thursday ECB monthly report, and on Friday German CPI and Euro Zone Employment figures.

NZDUSD

The US data surprised last week as all the releases in the run up to Fridays Unemployment data came out stronger than expected, giving the USD gains against the majority of its pairings.  NZDUSD was no exception and having started the week at 0.7860 it reached the weeks low on Thursday of 0.7630.  The US Unemployment release on Friday was the only weak data to come out on the US side which pushed the rate back a fraction higher for close of business – 0.7679.  At the beginning of this week the rate has continued at similar levels (0.7680) however the near term outlook for the NZDUSD is slightly uncertain.  Despite the majority of US data coming out strong last week the unemployment data shows that the US economy is still weak.  That coupled with a weakening NZD means there could be stalemate for a while with peaks and troughs coming from whatever data is released.  On the US side this week we have quite a busy calendar; the main potential market movers will be Ben Benanke’s speech on Monday night, Tuesday’s Trade Balance,  Wednesdays Mortgage Applications, Thursdays Retails Sales for May and Friday’s CPI (Consumer Price Index) for May.

AUDUSD

Last weeks movements were mostly in Aussie Dollars favour with the rate starting the week at 0.9520 and finishing at 0.9620.  Although the data in the US was better than expected the AUD stood its ground and with the Reserve Bank of Australia keeping interest rates on hold at 7.25% on Tuesday and the Australian 1st quarter GDP coming out better than expected (0.6% versus 0.3% expected) on Wednesday.  This week has started at similar levels (0.9615) but with a few cracks starting to appear in the AUD’s façade (Aprils retail sales came out at -0.2% rather than 0.2% expected) and with the odd bit of US data coming out above market expectation it is too hard to call which way the rate might go.  The US economy is still in a weakened state and the general trend for over the past year has been in Australian Dollars favour, however the strength of the AUD is starting to diminish.

NZDAUD

The New Zealand Dollar fell to a seven year low against the Australian Dollar – starting the week at 0.82 (AUDNZD 1.2195) and finishing on 0.80 (AUDNZD 1.25).  Despite there being the odd bit of negative data released in Australia economists are suggesting further gains could be expected this week especially if the retail sales figures in NZ come out poor on Friday.

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Email: renee.doughty@worldfirst.com Please feel free to contact me at anytime regarding these briefings, if you have any questions or thoughts on them, or if you are interested in a particular event in the calendar.

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