Foreign Exchange - Australia Weekly Update - Monday, March 16, 2009 23:17 - 0 Comments

World First NZD/AUD Weekly Update – 16th March 2009

NZD
Taking centre stage last week the official cash rate announcement results in New Zealand on Thursday did not surprise with the Reserve Bank cutting in line with expectations of 50 basis points, bringing the rate down to 3 percent.  The Reserve Bank has cut the OCR by a total of 5.25 percent in the last 8 months.

Other data out here in New Zealand was residential construction activity which fell 13.4 percent from the previous quarter.  Commercial construction managed a 1.6 percent increase.

Seasonally adjusted house sales rose 8.3 percent in February, and house prices are down 2.2 percent from a year ago.  February food prices rose 0.2 percent in the month to be 8.8 percent higher from a year ago.

Retail sales for January fell by 1.1 percent.  Core retail sales recorded a 0.3 percent increase.

AUD
The NAB Business Survey for February showed business conditions fell 9 to an overall reading of -20 index points – a new recent low and a level not seen since June 1992.  It’s consistent with further weakening of the economy through the current quarter.

Employment surprised with a small 1.8k rise in February (consensus -20k) but the better indicator as far as the tightness of the labour market is concerned is the unemployment rate.  The rate surged to 5.2 percent from 4.8 percent, the difference between the series was a sizeable lift in the participation rate, perhaps related to households trying to re-coup lost wealth by working more.

The week ahead:
NZD
Monday 16th – Manufacturing Activity (Q4) qoq
Friday 20th – Visitor Arrivals (Feb) mom, Credit Card Spending (Feb) yoy

AUD
Tuesday 17th – Reserve Bank Board’s March Minutes
Thursday 19th – New Motor Vehicle Sales (Feb) mom, Dwelling Starts (Q4)

GBPNZD
The RICS house price balance fell to yet another record low as the lack of affordable mortgages stifled an increasing number of buyer enquiries.  Industrial production fell 2.6 percent in February against a January figure of -1.6 percent while manufacturing output declined to 2.9 percent after January’s 2.2 percent fall.

It was a one-way street as far as movement in this pairing was concerned last week and it was all in the New Zealand Dollars favour.  The commodity currency gained just over 10 cents on the Sterling, the rate beginning the week in the 2.78’s to then close on Friday in the 2.67’s.  With a significant drop under its belt we might the GBPNZD rate level out this week, with possible moves just shy of the 2.65 level could be on the cards.

The week ahead in the UK:
Monday 16th – Rightmove House Prices (March) mom
Wednesday 18th – Bank of England Minutes, Jobless Claims change (Feb), ILO Unemployment Rate (Jan)
Thursday 19th – Public Sector Net Borrowing (Feb)

GBPAUD
The commodity currency benefited in this pairing, with the AUD taking back 8 cents from Sterling last week.  The rate commenced the week at GBPAUD 2.20 then fell to the low of the week on Wednesday of 2.1198.  Sterling then had a slight rally and for the remainder of the week the rate traded in the 2.12’s.

This week with the Bank of England minutes being released on Wednesday amoung other data out in the UK we may see a rally from Sterling pushing the rate back up closer to the 2.16’s.  For data out in the UK please refer to GBPNZD above.

EURNZD
Last Monday saw the peak of last week for the EURNZD pair when it reached 2.5104. Following Monday’s peak the rate traded downward in NZD’s favour ending the week on EURNZD 2.4530.
The poor Eurozone data last week was partly to blame for the downward movement in the rate.  European PPI figures on Tuesday came in weaker than expected (-0.8% versus -0.2% expected) as did investor confidence (-42.7 versus -38.0 expected).

Last Thursday’s RBNZ meeting and the inevitable interest rate cut didn’t halt the NZD’s gains as some thought it might.  The  RBNZ’s 50bps cut was clearly priced in to the market and the NZD maintained the  strengthening move against the Euro.  The obvious downside risks to growth in New Zealand are still in evidence but the RBNZ have signaled a slower pace of OCR cuts in upcoming meetings and this left the NZD supported.

The week ahead in the Euro zone:
Monday 16th – Consumer Price Index (YoY and MoM), Employment Change (4Q)
Tuesday 17th – ZEW Survey (Germany)
Thursday 19th – Industrial Production (YoY and MoM)
Friday 20th – Producer Price Index (MoM and YoY Germany), Construction Output, Trade Balance (Feb)

EURAUD
The beginning of last week saw the peak for the week for EURAUD at 2.0016 and from here the Euro lost ground finishing the week in the mid 1.95’s.
The AUD’s gaining strength against the Euro last week was in part due to poor Eurozone data (weaker than expected PPI and investor confidence figures) but also down to risk appetites improving courtesy of equity markets stabilising.  Subsequently in wasn’t surprising to see the AUD make gains against the majority of its pairs.
However at the end of last week and over the weekend breaking news could lend support to the Euro and in the short term hold the downward movement of EURAUD.  On Friday the Swiss National Bank (SNB), made comments which hinted at buying Euros in turn for selling francs, which obviously gave strength to the Euro, and the G20 over the weekend also confirmed it’s commitment to aid emerging markets, which suggests European banks with massive exposures to the Eastern block problems will take comfort – this likewise will prove to have a positive effect on the Euro at the outset of this week.
For data out in the Euro zone this week please refer to EURNZD above.
NZDUSD
Last Friday’s labour market report showed a sharp rise in the unemployment rate of 0.5 percent to 8.1 percent in February and has risen 0.9 percent just in the past two months.  Unemployment in the US has risen by 3.3 percentage points in the past year.  This is the steepest rise in the US unemployment since the 1973-75 recession when unemployment rose 3.9 percent in 1974.

Core retail sales, which exclude autos, building material, and petrol sales rose by 0.5 percent in Feb.

It was New Zealand Dollars chance to climb last week against a basket of currencies, included in that hamper was the USD.  The NZDUSD rate began the week just shy of the 0.50 level from there it steadily climbed last week to close on Friday in the early 0.52’s.

The week ahead in the US:
Tuesday 17th – Industrial Production (Feb), NZHB Housing Market Index (Mar)
Wednesday 18th – Producer Price Index (Feb) mom, Housing Starts (Feb), Building Permits (Feb)
Thursday 19th – Consumer Price Index (Feb) mom, FOMC Rate Decision
Friday 20th – Initial Jobless Claims (w/e Mar 15)

AUDUSD
The Australian Dollar took the wheel last week and steered itself into a mild victory over the USD gaining a couple of cents throughout the week taking the rate to the highest it has been since early February.  With the FOMC meeting this Thursday in the US we could possibly see the rate retrace and head lower towards the 0.63 level.  For data out in the US this week please refer to NZDUSD above.

AUDNZD
Just when we thought that the Australian Dollar had total control with the path of this rate the New Zealand Dollar struck back last week and pushed the rate down to the lows of February.  The AUDNZD started the week off in the 1.28’s from there the Australian Dollar had a brief rally, pre interest rate announcement here in New Zealand the rate dropped  down into the 1.26’s and continue to slide until close on Friday where it was at 1.2523 at close of play.  With fairly light data out from both countries this week we may see the rate sight tight at these lower levels for the time being.
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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 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.

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.