Daily Market Update - Tuesday, November 25, 2008 23:34 - 0 Comments

World First NZD/AUD Weekly Update - 24th November 2008

NZD
Something to remember at present is that as each quarter of negative growth passes we are closer to the day that the sun shines again.

The first stage of the New Zealand recession, led by the collapse in housing with sharp falls in spending, is largely behind us.   But the slump in global growth, with farm incomes and tourist flows to take a hit, will see investment falter and unemployment rise quickly.  Things will get worse before they get better, and we now see growth of just 0.3 percent in 2009.  Unemployment will push through 6.0percent and possibly higher.

Out locally last week food prices fell 0.3 percent in the month, although are still up 9.9 percent on a year ago. In the September quarter input prices rose 3.7 percent (13.6 percent on a year ago), while output prices rose 2.4 percent (9.8 percent on a year ago).  In October’s external migration a net 10 people permanently migrated to New Zealand in October fully offsetting a net 10 people who left the country last month.  Short-term visitor arrivals rose 0.7 percent, but are still down 3.3 percent on a year ago.  Credit card billings for October fell 1.1 percent, following a 0.9 percent rise in September.

AUD
September quarter retail sales volumes were softer than the market consensus had forecast.  Volumes rose a tepid 0.1 percent (seasonally adjusted) in the quarter to be up just 1.0 percent over the year.

Last Wednesday’s RBA Board minutes strongly inferred that the aggressive 75 bps easing was designed to quickly move the stance of monetary policy to neutral stance.

With Q3 GDP released on December 3, next week sees a couple of the Q3 partial indicators released.  Wednesday’s construction work done is expected to be weak again in the September quarter.  The financial crisis and the deterioration in the global and domestic economic outlook is likely to see investment spending ease back significantly over the next few quarters.

The week ahead:

NZD
Tuesday 25th – RBNZ 2-year Inflation Expectation
Thursday 27th – Trade Balance (Oct), NBNZ Business Confidence (Nov)
Friday 28th – Building Permits (Oct) - mom

AUD
Wednesday 26th – Construction work done (Q3), DEWR Skilled Vacancies (Nov) – mom
Thursday 27th – Private Capital Expenditure (Q3)
Friday 28th – Private Sector Credit (Oct) – mom, HIA New Home Sales (Oct) - mom

GBPNZD
In the UK inflation turns negative as the economic outlook keeps deteriorating.  The headline rate fell by 0.2 percent in October.  Inflation will carry on falling over 2009 as the impact of falling energy and food prices is felt further.  Rightmove house prices fell 2.9 percent in November alone, accelerating from a 1.0 percent fall in October.  The labour market has also been deteriorating alarmingly.

In the GBPNZD pairing last week it was Sterling that triumphed, gradually appreciating against the New Zealand Dollar over the course of the week.  The rate commenced the week at GBPNZD 2.65 and finished trading on Friday in the 2.80’s.  At opening today the rate had corrected somewhat and was at GBPNZD 2.77, this week we could see some more Sterling strength and the rate possibly push above the 2.80 mark once more.

The week ahead in the UK:
Wednesday 26th – GDP (Q3) – qoq
Friday 28th – Gfk Consumer Confidence Survey (Nov)

GBPAUD
Similarly as with the GBPNZD rate, last week went in Sterling’s favour.  Commencing the week the rate was at GBPAUD 2.26 to gradually appreciate throughout the week, reaching the high for the week on Thursday of GBPAUD 2.42 before correcting and closing on Friday at GBPAUD 2.40.
Data is light from both sides this week, we could continue to see risk aversion levels at play and if conditions escalate then Sterling might rally back into the 2.4 territory.  For data out in the UK please refer to GBPNZD above.

EURNZD
The Euro zone has entered a technical recession with GDP contracting 0.2 percent in Q3 after the same print in Q2.  Italy joined Germany and Ireland in technical recession.  ECB officials have flagged cuts to growth forecasts, lower inflation and hence further rate cuts ahead.

The fact that the Euro zone has entered a technical recession did not deter the Euro from making significant gains on the New Zealand Dollar last week.  Commencing the week at a level of 2.26 the EURNZD rate gradually climbed before spiking on Thursday and hitting the peak of the year just below the 2.4 level.
This week again with most data coming out of the Euro zone the ball is in the Euros court and a push above 2.4 might not be off the cards.

The week ahead in the Euro zone:
Monday 24th – Germany, IFO Business Climate (Nov)
Tuesday 25th – Germany GDP (Q3) qoq, Gfk Consumer Confidence Survey (Dec)
Thursday 27th – Consumer Confidence (Nov), Economic Confidence (Nov), Germany ILO Unemployment Rate (Oct)
Friday 28th – CPI Estimate (Nov) yoy, Unemployment Rate (Oct)

EURAUD
Things were slightly different in the EURAUD camp when compared with the EURNZD rate last week.  The first half of the week there was barely any movement from both sides until Thursday when Euro made its moves appreciating up from 1.96 to the 2.04 level before ending play on Friday in the 2.02’s.

This week the ball is in Euro court and we could see some further upward movement or Euro strength maintaining some of the gains it made on the Australian Dollar last week.  For data out in the Euro zone this week please refer to EURNZD above.

NZDUSD
In the states previous inflation worries have reversed to be replaced by the fear of deflation.  Headline inflation fell a record 1.0 percent in October, largely due to a 14.2 percent drop in petrol prices.  US consumer spending fell by 3.1 percent in Q3 which suggests the cause of this relief has been domestic weakness.  Initial jobless claims have rocketed to 542k, the highest level since 1982 except for one week in1992.

Despite the poor data out in the US it was the turmoil in the equity markets that again lead the USD to make advances on the New Zealand Dollar last week.  The rate started the week in the NZDUSD 0.55 region to then slowly move towards the low of the week on Thursday at NZDUSD 0.5215.  This week as with the other rates eyes will be on the stock exchange movements and the effect it will have on the USD.

The week ahead in the US:
Tuesday 25th – Existing Home Sales (Oct)
Wednesday 26th – GDP (Annualised), Consumer Confidence (Nov), House Price Index (Nov)
Thursday 27th – Personal Income, Personal Spending (Oct), Initial Jobless Claims (w/e Nov 23), New Home Sales (Oct)

AUDUSD
Advancements came from the USD in this pairing last week, the rate opening on Monday at AUDUSD 0.65 falling away to the low of the week on Thursday of 0.61 with the Australian Dollar making a small comeback and closing in the 0.62’s on Friday.

If we were to follow the trend of the past couple of weeks we could see the USD gain slowly throughout the course of the week and the possibility of hitting the 0.59 level might not be too far off if the current volatility continues.  For data out in the US please refer to the NZDUSD rate above.

AUDNZD
Rallies came from both sides of the ditch last week with the rate bouncing between the AUDNZD 1.165 level and the 1.18 level.  However, the week closed in the Australian Dollars favour in the AUDNZD 1.18 level.  The Australian Dollar as a commodity seems to be faring better at present against the New Zealand Dollar and this week might see no change to that with the rate possibly pushing the 1.20 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.

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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.