Foreign Exchange - Australia Weekly Update - Monday, August 17, 2009 6:37 - 0 Comments

World First Foreign Exchange NZD / AUD Update: 17th August 2009

NZD
The domestic data coming out of New Zealand last week was by and large positive and thus supportive of a stronger kiwi dollar.  Of note retail spending rose 0.8% in the month and house sales rose by 4.6%.  However the start of the new week has brought about talk of risk aversion so we could see some of last week’s gains eradicated. 

The NZD having gained against the majority of its pairings last week has opened lower against many at the start of trading today.  At the latter end of last week US consumer confidence surprised the market with a lower than expected figure which toppled the NZDUSD rate off the peak for the year so far.  With the outlook for the US economy looking a little shakier than a week ago risk investors are unwinding some of their recent NZD purchases to the detriment of the NZ dollar.

The coming week has local data in the form of June quarter PPI and July figures for Migration.  The PPI will likely be lower than the prior quarter due to lower commodity prices and the migration figures could well remain flat given that the outflow of workers is unlikely to have risen as overseas opportunities are harder to come by, and immigrant figures could well be down for the same reason ie opportunities are harder to come by so migrants are less attracted to come to NZ.  All in all the outlook for the week for the NZ dollar is one of a more subdued trading pattern with potential risks to the downside. 

AUD
The markets are now looking for a potential interest rate rise in Australia before the year is out and Governor Glenn Stevens did nothing to squash those murmurs only stating that he had reason to expect Australia would be one of the first nations to move in his speech to the House of Representatives economics committee on Friday of last week. 

Governor Stevens went on to state that the Reserve Bank had not made any decisions as to when a rate hike would occur but that they wanted to get interest rates back to more ‘normal’ levels.  He did not state what ‘normal’ levels were but was happy to suggest that ‘normal is a good deal north of where the cash rate is now’.

It would seem that the RBA’s decisions to slash the interest rate to the 40 year low of 3% was done off the back of a worse economic prognosis than the one that has so far come to fruition for Australia.  Governor Stevens went on to state ‘On the basis of the information to hand at present, this may well turn out to be one of the shallower recessions Australia has experienced’ – positive words indeed for Australia and words that will add support to the Aussie dollar over the coming weeks.

The week ahead:
NZD
Monday 17th – Non Resident Bond Holdings (July)
Wednesday 19th – Produce Price Inputs and Outputs (2Q)
Friday 21st – Visitor Arrivals (July), External Migration (July), Credit Card Spending (July)

AUD
Wednesday 19th – RBA Assistant Governor Malcolm Edey speaks in Sydney
Thursday 20th – RBA Foreign Exchange Transactions (July)

GBPNZD
The pound had another poor week against the NZ dollar – starting last week at 2.4390, gaining a small amount mid week to 2.48 before finishing in similar territory to where it started around the 2.438 mark. 

If investor appetite in the high yield currencies (AUD, NZD) diminishes off the back of the poor US consumer confidence figures at the end of last week then the pound could gain back some of the lost ground and claw back to the GBPNZD 2.5 level however the UK domestic data might not be pretty so it could be a rocky road over the coming 5 days.

The week ahead in the UK:
Monday 17th – Rightmove House Prices (MoM Aug)
Tuesday 18th – CPI (MoM and YoY – July)
Wednesday 19th – Bank of England minutes for August 6th meeting.
Thursday 20th – Retail Sales (July), Public Sector Net Borrowing (July)

GBPAUD
The outset of last week saw sterling trading against the Australian dollar at the lowest level this year (1.9650) and in fact you have to go back as far as 1996 to see comparable levels.  However, that said, sterling did make a reasonable midweek move pushing back to the GBPAUD 2.0 mark before returning down to the 1.96’s toward the end of the week.  The outset of this week has seen a small recovery by the pound and GBPAUD is again flirting with the 2 dollar mark. 

The UK is the sad clown of the economic world right now with both the Eurozone and the US recently posting positive GDP figures – meaning that out of the big three only the UK is seemingly left to pull itself out of the rut.  Seeing as the outlook is considerably more positive in Australia any gains the pound can make against the AUD is likely to be down to risk aversion – the small gains at the outset of this week can be put down to this, however should risk appetite resume the pound will continue to come under pressure.

For data out in the UK please refer to GBPNZD above.

EURNZD
The Euro started last week by gaining almost 2% against the NZ dollar (moving up from EURNZD 2.09 to 2.13) before heading back down to the 2.1 mark for the end of the week.

With the surprise jump in the Eurozones 2nd quarter GDP figures (both France and Germany posted 0.3% gains) there was perhaps less of a gain made by the Euro as one might have thought.  However with risk appetite reasonably strong last week the NZ dollar faired reasonably well.  However the new week has heralded a bout of risk aversion (see USDNZD below) and this may prove the Euros short term chance to gain some ground back.

The week ahead in the Euro zone:
Monday 17th – Trade Balances (June)
Tuesday 18th – German ZEW index (Aug)
Wednesday 19th – ECB Current Account (June), Construction Output (June)
Friday 21st – PMI (Aug)

EURAUD
Having gained ground on the Euro for the best part of a month the Aussie dollar gave back some of the gains last week following the reports that both France and Germany are out of recession (Thursdays GDP figures for Germany and France contributed to an unexpected jump in European GDP).  The outset of the week had the pair at EURAUD 1.6880 but by the end of the week the rate had broken back above 1.70 and is continuing to climb at the start of the new week.

For data out in the Euro zone please refer to EURNZD above.

NZDUSD
Last week saw some rapid movement for NZDUSD – with both ground lost and regained for the NZ dollar.  Starting last week at 0.6720 the pair moved a cent lower before rebounding and hitting the year high at 0.68.  The 0.68 level has proved to be a resistance level and the rate has settled back down in to the 0.67’s.

Good domestic data for NZ along with an appetite for risk investment saw the NZ dollar continue to test the peak levels for the year however last Friday’s surprisingly poor consumer confidence figures from America meant risk aversion is now in play – it may not last long but while it is the NZDUSD rate will have downside risks and not contest the 0.68 peak. 

The week ahead in the US:
Monday 17th – Empire Manufacturing (Aug), NAHB Housing Market Index (Aug)
Tuesday 18th – PPI (July), Building Permits (July)           
Thursday 20th – Initial Jobless Claims (w/e Aug 9), Philadelphia Fed (Aug)
Friday 21st – Existing Home Sales (July), Bernanke speaks at Fed’s Jackson Hole Conference.

AUDUSD
The Aussie dollar continues to flirt with the year highs against USD however the rate is struggling to break upwards of the 0.8450 mark which it has touched on a couple of occasions since the beginning of this month.

The Fed, as expected, left US interest rates on hold last week and left an elongated halt on its quantitative easing.  They didn’t raise the amount available ($300bn is still in the pot) but they extended the time in which these dollars are to be spent to mid October.  This was viewed as US dollar positive and heralded a reasonable midweek gain for the USD against the Aussie dollar however as has been the run of things lately when the US data is good the commodity currencies are strengthened due to risk investment so it wasn’t long before the AUD gained back the lost ground. 

The end of the weeks poor US consumer confidence figures put pay to the Aussie dollar testing the year’s high and the outset of this week has seen risk aversion tactics come into play.  In short the outlook for the US is not as buoyant as it was a week ago and therefore riskier investments are taking a back seat in preference for safe haven areas once again.

For data out in the US please refer to NZDUSD above.

AUDNZD
Last week belonged to the NZ dollar as it made a 1.5% gain against the Aussie dollar to take this pairing down into the 1.22’s – an area it hasn’t been in since early April this year.  These moves are against the run of expectation, to put it simply the AUD is the form currency and prognosis is good, on the other hand the NZD has a less optimistic horizon so last week’s trading could be a one off and we expect fewer gains for the NZD against the AUD in the coming week.

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Please feel free to contact me (giles.smallwood@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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