NZ/Aus/S. Africa - Weekly Update - Monday, January 12, 2009 23:22 - 0 Comments

World First NZD/AUD Weekly Update – 12th January

NZD
Out last week in New Zealand data painted a brighter picture of the economy than that of last year. The merchandise trade deficit recorded a surprise improvement in November, falling to $520 million.  On an annual basis, the trade deficit narrowed from $5.27 billion to $5.16 billion.  Also out last week the value of New Zealand’s commodity basket fell 7.4 percent in December, the fifth successive fall in the index.  Prices are now 27 percent lower than their peak in July.

Before we get too cheery on the state of the New Zealand economy this week the quarter four Business Outlook (out on Tuesday) could well show a marked worsening in economic sentiment from the previous September survey.  Also out November’s building consents could see a technical bounce following October’s 22 percent plunge, but will still likely leave consenting activity more than 30 percent below year earlier levels.

AUD
In Australia building approvals collapsed further in November, falling by 12.8 percent after the 3.1 percent fall in October.  In November just 9,581 dwellings were approved, well below the 15k/month underlying requirement.  The aggressive interest rate cuts by the RBA in late 2008 will take some time to improve confidence and increase activity in the housing sector, meaning there will be little improvement in supply in the first half of 2009.

The week ahead:
NZD
Tuesday 13th – NZIER Business Confidence
Wednesday 14th – Building consents m/m
AUD
Wednesday 14th – Home loans m/m
Thursday 15th – Unemployment rate, NAB Quarterly Business Confidence

GBPNZD
Despite the further interest rate cuts in the UK Sterling gained on the New Zealand Dollar throughout last week.  The rate commenced trading on Monday in the mid GBPNZD 2.47’s the rate then climbed about 10 cents to hit the high of the week on Thursday of GBPNZD2.58.
Following last week’s cut in the Bank Rate to 1.5% there is very little data this week to provide further colour on the outlook. Indeed in any case with so much weakness ‘baked in’ for 2009 it’s currently unlikely that any data outturns will have much impact on their own.

The week ahead in the UK:
Tuesday 13th – RICS House Price Balance (Dec), Total Trade Balance (Nov)
Friday 16th – BoE Deputy Governor Gieve to Make Speech

GBPAUD
In this pairing as with the GBPNZD rate, the week went to Sterling with it making constant gains on the Australian Dollar.  On Monday the rate was sitting in the GBPAUD 2.04 level, Sterling then appreciated against the Australian Dollar and climbed to the peak of the week on Thursday of GBPAUD 2.16.  This week as trading should pick up from people returning from the holiday season and trading increasing we might continue to see Sterling strengthen and possibly push up into the GBPAUD 2.18 – 2.20 band.  For data out in the UK this week please refer to GBPNZD above.

EURNZD
The market will be looking to see whether the ECB will be following the Bank of England and accept that weaker economic growth in the fourth quarter of 2009 requires additional monetary stimulus.  In the run up to the meeting, we suspect that inflation data from both France and Germany will be very soft, raising the prospect that the final Euro zone CPI estimate is revised down further from the 1.6 percent preliminary print.

The movements of the EURNZD were a mixed bag of sorts last week, the rate opening on Monday a fraction above the EURNZD 2.30 level to then take a dive on Tuesday into the 2.26’s.  The EUR then corrected itself back into the 2.30’s where it closed on Friday.

This week the big ticket announcement is the interest rate decision in the Euro zone on Thursday, a cut is looking imminent and this could flow on to depreciate EUR slightly but if we are to consider previous interest rate cuts in the past 6 months they are not heavily weighing on exchange rates at.

The week ahead in the Euro zone:
Wednesday 14th – Industrial Production (Nov) mom
Thursday 15th – CPI (Dec) mom
Friday 16th – ECB Interest rate Decision

EURAUD
Some ups and downs with this couple last week.  Trading commenced on Monday in the EURAUD 1.90 level to then fall away to the low of the week on Tuesday of EURAUD 1.86 to then spend the remainder of the week climbing to reach a high of EURAUD 1.943 on Friday.  With the interest rate decision out in the Euro zone on Thursday there could be some volatility in the rate surrounding that, for all other data out in the Euro zone this week please refer to EURNZD above.

NZDUSD
Friday’s payroll data showed the US economy shedding 2.59 million jobs over the course of 2008 as a whole, the largest number of job losses since 1945.  As markets gear up for the inauguration of President Obama on 20th January, we suspect that most of the economic data released this week will be largely ignored as fourth quarter output has already been written-off.

The typical year-end seasonal effect saw the NZD drift higher these past two weeks.  USD weakness no doubt assisted this move, as did some return of risk appetites early this year.  Expect fundamentals to start dominating, as the domestic dataflow start to pick-up this week in New Zealand.

A still attractive yield advantage (5 percent in NZ versus zero in the US) and with dataflow out in the US still nasty we could see the NZDUSD rate continue its push against the 0.60 level.

The week ahead in the US:
Wednesday 14th – Trade balance (Nov)
Thursday 15th – Import Price Index, Advance Retail Sales (Dec)
Friday 16th – Producer Price Index (Dec) mom, Initial Jobless Claims (w/e Jan 11)
Saturday 17th – Consumer Price Index (Dec) mom, Industrial Production (Dec)

AUDUSD
The Australian Dollar gained against the USD for the first half of last week reaching the peak on Tuesday of AUDUSD 0.724.  During the latter part of the week the USD fought back and closed on Friday under the 0.70 level.  It seems that at present the USD has gained momentum over the Australian Dollar and if this is the case the rate might continue to venture south towards the AUDUSD 0.65 level.  For data out in the US please refer to NZDUSD above.

AUDNZD
The movements last week were predominantly in New Zealand Dollars favour bringing the rate from above the AUDNZD 1.215 level down into the 1.19’s the lowest the rate has been since just before Christmas.  With data being second tier from both sides this week we might not see too much movement and the rate could well continue between the AUDNZD 1.18 – 1.20 band.

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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.