Foreign Exchange - Australia Weekly Update - Thursday, October 2, 2008 23:33 - 0 Comments

World First NZD/AUD Weekly Update – 29th September 2008

NZD
In New Zealand last week there was some mild evidence of improved household spending and evidence that people have opened their wallets slightly wider.  The monthly Electronic Card Transactions data compiled and released by Statistics New Zealand shows that in seasonally adjusted terms during August spending improved by a strong 1.7% for the core retail classification.
Also out last week on a positive not from the economic climate was Consumer sentiment measured in a quarterly survey sponsored by Westpac improved sharply in the September quarter to a reading of 104.8 from a 17 year low of 81.7 in the June quarter.  With a reading of 100 considered neutral the result means optimists now outnumber pessimists.
On Friday last week production GDP contracted by 0.2 percent, taking year on year growth to 1.0 percent.

AUD
Little was out in Australia last week with the exception of the Reserve Bank of Australia reporting that the Australian financial system is coping well saying that the banking system is soundly capitalized, with only limited exposure to sub-prime assets, profitability remains strong and there are low levels of problem loans.  The RBA also said that the insurance sector is sound.
Household demand for credit has slowed, as households enter a period of balance-sheet consolidation.  Despite difficult financial conditions, overall arrears rates on housing loans have changed little in the past year and remain low.  The RBA expects a weak global economic recovery in 2009.  A return to more settled market conditions requires a rebuilding of confidence in overseas financial institutions, and the US financial relief measures are to be welcomed.

Data out this week:
NZD
Monday 29th – Trade Balance
Tuesday 30th – Building Permits (Aug) mom, NBNZ Business Outlook
Thursday 2nd – ANZ Commodity Price (Sep)

AUD
Tuesday 30th – Private Sector Credit (Aug) mom, Building Approvals (Aug) mom, Retail Sales Trend (Aug) mom
Thursday 2nd – ANZ Commodity Price (Sep)

GBPNZD
NZD had a largely directionless week last week as liquidity remains thin and many sit on the sidelines lacking the willingness to take on risk.  NZD is thought to been borrowed time, and lower dairy prices seem to have cemented that view.
Last week opened at 2.66, Sterling then gained on NZD to reach the peak of the week at 2.725 on Wednesday and then gradually traded back down to close on Friday at 2.682.

Last week more bad news was out for the UK housing market.  Asking prices were down 1% in the first 3 weeks of September and are now down 3.3% on a yearly figure.

Developments on the financial markets are likely to once again dominate the rate this week.  As the global economy waits with bated breath for the bailout decision in the US we might not see too much movement in the GBPNZD rate and this week it may continue to trade in the GBPNZD 2.66 – 2.69 range.

The week ahead in the UK:
Monday 29th – Net Consumer Credit (Aug), Mortgage Approvals (Aug)
Tuesday 30th – GfK Consumer Confidence Survey (Sep), GDP (2Q), Current Account
Wednesday 1st – PMI Manufacturing (Sep)
Thursday 2nd – Nationwide House prices (Sep)mom, PMI Construction (Sep)
Friday 3rd – PMI Services (Sep)

GBPAUD
With not much out from either side last week the GBPAUD traded through last week in a stalemate.  Opening on Monday at GBPAUD 2.20 climbing to the peak on Tuesday of GBPNZD 2.22 spending the rest of the rate in the lower 2.21’s.

With the majority of data being released for the UK this week we may see it trade in similar levels as last week and in between the GBPAUD 2.22 – 2.24 band.  For data out in the UK this week please refer to GBPNZD rate above.

EURNZD
Despite a stronger September ZEW survey, the September IFO survey, which does not include the financial sector, fell sharply from 94.8 to 92.9.  It has fallen for three months straight and there is a growing consensus that Germany is heading for a recession.
There was significant amount of movement last week from the EUR camp.  The rate started the week at EURNZD 2.11 moving to the peak on Wednesday of 2.16 before slipping away slightly to end play on Friday at 2.13.

This week the ECB is announcing its interest rate decision and thoughts are divided on whether they will cut interest rates or hold them constant, from the data released recently they certainly have grounds to but they may hold off for the time being as Trichet has alluded to.  The rate this week could trade in anticipation and trade up slightly in the 2.11 – 2.14 band.

The week ahead in the Eurozone:
Monday 29th – Business Climate Indicator (Sep), Consumer Confidence (Sep)
Tuesday 30th – Germany Unemployment Rate (Aug), CPI estimate (Sep) yoy
Wednesday 1st – Germany PMI manufacturing (Sep)
Thursday 2nd – PPI (Aug)
Friday 3rd – ECB Announces Interest Rates, Retail Sales (Aug) mom

EURAUD
Last week there was a lot less movement in this rate than the EURNZD pairing.  On Monday the rate opened at 1.74 EUR climbed up to just above the EURNZD 1.76 level and then continued to trade out the rest of the week in the 1.75’s.
All eyes will be on the interest rate decision in the Eurozone on Thursday.  If rates are held constant the EUR may rally slightly on the AUD and come up closer to the 1.76 level.  For data out in the Eurozone please refer to the EURNZD above.

NZDUSD
This week the major item of news is the US Treasury negotiating the details of a potential USD 700bn bailout with Congress.
“This plan sends a strong signal to markets around the world that the United States is serious about restoring confidence and stability to our financial system,” Bush said in a written statement.

At opening last week the rate was at NZDUSD 0.69 the highest it has been in sometime before retracing back into the 0.68 level on Wednesday where it continued to trade within the NZDUSD 0.68 – 0.69 band for the remainder of the week.
The ball is in the US economy’s court this week and if we see some strong results come out and the bailout given the go ahead the rate may well head in the US’s favour and back down towards the NZDUSD 0.66 levels.

The week ahead in the US:
Tuesday 30th – Personal Income and Personal Spending (Aug)
Wednesday 1st – Consumer Confidence (Sep)
Thursday 2nd – ADP Employment Change (Sep)
Friday 3rd – Factory Orders (Aug), Change in Non-Farm Payrolls (Sep)

AUDUSD
As with the NZDUSD rate the Australian Dollar made some ground on the USD at the beginning of last week, at one stage on Monday reaching above the 0.85 level.  For the remainder of the week the rate traded like most other pairings in a stalemate with neither currency getting much of a footing against the other hence the rate NZD USD 0.835 – 0.84 band.
This week again as with the NZDUSD rate focus will be on releases fro
m the US.  Depending on the bailout outcome the US could possibly see gains on the AUD and trade down lower into the 0.82 – 0.81 levels.  For data out in the US this week please refer to NZDUSD above.

AUDNZD
With little out on either side of the Tasman there was not much movement in the rate at the beginning of the week.  Opening at AUDNZD 1.22 on Monday the rate then traded up in AUD favour to touch on the 1.225 level and on Friday despite the poor GDP figures being released in New Zealand and the confirmation that we are in the midst of a recession the rate dropped away down into the 1.21’s.
With both economies not holding a better position above the other there might not be in major advances in the rate this week with the possibility of it continuing to trade between AUDNZD 1.20 – 1.22.

___________________________________________________________________________________________

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 or direct on 0064 7839 6114.

Please reply with REMOVE in the subject of your e-mail if you would like to be removed from our mailing list.

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.