The Australian dollar found fresh highs for the year against the USD, overcoming an initial weak lead by the commodity markets and then finding strength off the back of a positive shift in commodity prices and a continued positive outlook for the global recovery and the local economy. These gains were short-lived as overseas equity markets fell by the wayside and risk appetite returned to the market.
The week started with weakness for the Aussie as commodity prices pulled back, however as commodity markets found their feet again, the AUD was able to find a new high against the USD. This strength was well timed with Australia’s HIA New Home Sales which came out at 11.4% against the previous month’s 0.1% which provided further resilience for the earnings of Australian Banks, which the RBA dubbed ‘solid profits’, and the Australian financial system as a whole.
These new highs for the year were partially erased however as both US Existing Home Sales and US Durable Goods were worse than expected, prompting a pull-back in risk appetite and a fall for the Aussie against the Greenback.
The week ahead in Australia
Wednesday 30th – Retail Sales Trend, Building Permits, Private Sector Credit.
The AUDUSD started last week on a downward trend, only to push higher mid week to reach new highs for the year at the 0.8786 level, the currency pair finished the week close to where it began the week at 0.8675.
The week ahead in the US:
Tuesday 29th – Consumer Confidence.
Wednesday 30th – Real Personal Consumption Expenditures, GDP Annualised, Gross Domestic Purchases Price Index.
Friday 2nd – Nonfarm Payrolls.
The AUDGBP has moved away from risk appetite as the main indicator that dominates the AUDUSD, AUDJPY pairings, and continued to go from strength to strength, starting the week at 0.5330 and closing the week at 0.5414.
The week ahead in the UK:
Tuesday 29th – Consumer Credit, GDP, M4 Money Supply, CBI Distributive Trades Survey, Gfk Consumer Confidence.
Wednesday 30th – Index of Services.
Thursday 1st – PMI Manufacturing.
This pairing started the week at 0.5890 pitching to 0.5920 on Thursday afternoon and then closed the week at 0.5910.
The week ahead in the Eurozone:
Monday 28th – ECB Trichet’s Speech
Tuesday 29th – Consumer Confidence, Economic confidence, Industrial Confidence.
Wednesday 30th – CPI.
Thursday 1st – PMI Manufacturing, Unemployment Rate (Aug)
The economic data from New Zealand was nothing but positive with the GDP figure released on Tuesday taking New Zealand out of a recession.
The Kiwi couldn’t avoid the pitfalls of a fall in commodity prices, namely oil and gold, however the GDP figure of positive 0.1% increased speculation about interest rate rises being earlier than expected. This figure coincided with an increase in payouts to dairy farmers by Fonterra Cooperative Group, the world’s largest dairy exporter whilst the current account also improved to 0.12B as the recession has prompted lower demand for imported cars.
The New Zealand dollar weakened against the USD towards the end of the week after the US Home Existing Home Sales figure was worse than expected and risk appetite fell away from currencies tied to the global economic recovery and currencies linked to commodity prices.
The week ahead in NZ:
Monday 28th – Building Permits
Wednesday 30th – Business Confidence
AUDNZD started the week at 1.2083 and weakened throughout the week to finish at 1.2069 as the Kiwi strengthened against all of the majors throughout the week.
GBPNZD started the week at 2.3790 and remained relatively stagnant until finding its high early Friday at 2.3855, only to fall again and finish the week at 2.3680.
EURNZD started the week at 2.0677 and weakened to close the week at 2.0392.
The NZD strengthened against the USD, however in a more volatile fashion relative to the other majors. The pair started the week at 0.7076, reached 0.7312 and then closed the week at 0.7180.