Foreign Exchange - Australia Weekly Update - Monday, August 25, 2008 5:37 - 0 Comments

World First NZD/AUD Weekly Update – 25th August 2008

NZD

We have learnt very little that is new about the New Zealand economy over the past week. 

Business non-labour input costs rose by 5.6% in the June quarter to sit 11.8% ahead of a year earlier.  This was driven by the sharp increases in fuel and electricity prices (low lake levels) and is the greatest quarterly increase since March 1980.

One thing different this recession from the last one is that net annual migration inflows remain positive. There was a net addition to New Zealand’s population from permanent and long-term migration flows in July of 696 people.  New Zealand continues to receive strong net migration inflows amounting over the past year to some 16,000 from Asia, 11,000 from Europe including 7,558 from the United Kingdom, and 6,000 from the Americas.  In more local data released last week total credit card billings rose by 4.0 percent

AUD

The Australian economies support system (commodities) is crumbling causing the AUD fall from grace.  Commodity prices have dropped sharply since oil hit all time highs last month this is adding to the fact that Australia has not escaped the credit crunch as many had hoped.  

With Q2 GDP released on September 3, this week we see a few of the partial indicators released.  Construction work done is expected to be little changed in the June quarter, following growth of 2.3% in the March quarter.

High interest rates, declining confidence levels and a tightening in financial conditions continue to slow credit growth.  On top of the still ever present inflationary concerns, this is an important reason why the RBA cannot yet move to a neutral stance on monetary policy, let alone an easing stance. 

The week ahead:

NZD

Tuesday 26th – Trade Balance, RBNZ Inflation Expectations q/q

Wednesday 27th – Business Confidence

Friday 29th – Building Consents m/m

AUD

Wednesday 27th – Construction Work Done q/q

Thursday 28th – Private New Capital Expenditure q/q

GBPNZD

The unexpected increase in retail sales in July of a rise of 8% as opposed to a forecasted fall of 0.2% expected was not enough good news to give the Sterling any gas against the New Zealand Dollar.

Sterling took quite the fall from the previous week to open last week’s trading at GBPNZD 2.615 and for the remainder of the week having no major movements staying pretty stagnant between the GBPNZD 2.605 – 2.615 range. 

No surprises from the BoE minutes, reiterating the tone set last month and continuing sterling’s poor form.

With most of the data coming out of New Zealand this week expected to be negative likewise for the UK the rate may well continue to trade in the GBPNZD 2.60 – 2.63 range.

The week ahead for the UK:

Tuesday 26th – BBA Loans for House Purchase

Thursday 28th – Nationwide House Prices (Aug) mom

Friday 29th – Gfk Consumer Confidence Survey (Aug)

GBPAUD

At opening last week the rate was at GBPAUD 2.139, Sterling then pushed up to the 2.15 briefly on Tuesday and Thursday.  The remainder of the week the rate was in between the GBPAUD 2.12 – 2.14 level.  This week with data releases light on the Australian front the AUD might stand in better stead to make up some up that lost ground and push up into the GBPAUD 2.15 – 2.16’s.  For upcoming UK data please see GBPNZD above.

EURNZD

From trading up in the 2.17s the week previous, last week saw the rate retreat back down with little movement to trade between the EURAUD 2.06 – 2.08 band.  This is despite the German investor sentiment according to the ZEW index rising more than expected in August from -63.9 in July as the positive effects of a weaker Euro underpinning exports coupled with lower oil prices filtering to decreased costs for companies.  Should these positive influences continue they will provide some buffer to the Euro-zone economy which has slowed to negative growth for Q2.

With data being released expected to be weak from both sides we might just see a slight bounce back from the Euro and trade between the EURNZD 2.08-2.10 band.

The week ahead for the Euro zone:

Tuesday 26th – Germany GDP (Q2) qoq, Gfk Consumer Confidence Survey (Sep)

Thursday 28th – Germany Unemployment Rate (Jul)

Friday 30th – Euro-Zone Unemployment Rate (Jul), Business Climate Indicator (Aug)

EURAUD

The Euro rallied against the AUD last week commencing trading at a rate of EURAUD 1.684, increasing to 1.694 on Wednesday to have a slight dip on Thursday to then climb up to EURAUD 1.70 on Friday.  It could be Euros loss this week with more negative data imminent and the Australian Dollar might have taken enough of a blow as of late to hold firm.  Its peak this year was in March when the rate hit the EURAUD so it is not that far away from that now.

NZDUSD

In the US Housing starts and building permits slumped in June, continuing their downward trend as expected after a blip of a rise in May.  Fed President Stern has changed tack in the past month from talking up the risks of inflation to this week saying “now is a good time to be patient” on interest rates because “we will see better news on the inflation front” soon.   The slowdown is increasingly looking like it will be protracted if not sharply negative in terms of GDP growth.  Persistently high initial jobless claims and slumping building permits are the main driving factors here.  It is expected that the continued uncertainty over the economic outlook over the medium term will keep interest rates on hold through 2008.

At opening last week the rate was at NZDUSD 0.708 it rallied between the 0.705 – 0.715 range until Thursday when it spiked for the week at NZDUSD 0.72 then dropped back down to 0.71 at close of play.

This week we could witness the rate trade between the 0.70 and 0.72 with the latter seeming to be the new resistance level for the NZD.

The week ahead in the US economic calendar:

Tuesday 26th – Existing Home Sales (Jul) mom

Wednesday 27th – Consumer Confidence (Aug), House Price Purchase Index (Q2) – qoq, Minutes of August 5 FOMC Meeting

Friday 29th – GDP (Annualised), GDP Price Index (Q2), Initial Jobless Claims (w/e Aug 24)

AUDUSD

At opening last week the rate was at AUDUSD 0.872 it then dipped on Tuesday to 0.86 before continuing to climb up to AUDUSD 0.88 on Thursday thereafter retreating to the AUDUSD 0.86’s on Friday. With the early signs of the USD recovery story running out of puff we could see the rate continue in its current levels with the AUD doing its best to fair off the price falls of commodities. 

AUDNZD

Relatively little movement with the rate last week it opened at AUDNZD 1.22 from there it spent the remainder of the week between the 1.219 and 1.225 band.  This coming week we could see the rate continue to trade at current levels.  This week the AUD pushing has the possibility of pushing slightly higher with negative inflation expectations and business confidence data out in New Zealand on Tuesday and Wednesday.  The rate did recover from these levels in May.

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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 currency 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 or direct on 0064 7839 6114.

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