Last week was an historic week within the world markets with the central banks taking centre stage.  No less than 8 central banks cut their respective interest rates; the RBA led the way with 100 bps, the RBNZ, not to be outdone cut by 150bps, the Bank of England by 100bps, the ECB by 75bps, the Swedish Riksbank by a huge 175bps, the Danish central bank by 75bps, the Bank of Indonesia by 25bps and the Bank of Thailand by 100bps.

While the RBNZ cut by an unprecedented (but expected) 150bps we don’t anticipate that to be the end of the cuts although it is likely they will be in smaller increments from now on i.e. 50bps at a time with the next cut likely to occur in January ’09.

Looking forward this week the NZ domestic data gives us an indication to 3rd Quarter GDP with the Terms of Trade figures – these we expect will come in weak which would be no surprise and will only contribute to the NZD coming under pressure.

The broad picture is that with commodity prices falling and reduced demand for investors buying the NZD we expect that NZD weakness could be set to continue for some time.



The Australian central bank cut rates on Tuesday by a full 1% and like other central banks there is room to accommodate further cuts if necessary.

The current interest rate of 4.25% could be cut down to around 3% by the middle of next year and the markets have started to price this in.  However the AUD is fairing slightly better than many currencies in the current climate which is largely down to a few key factors; so far it hasn’t suffered a fall in GDP unlike the UK, Eurozone and the US. Much of the ‘bad news’ floating around has already been priced in to the market so essentially it can’t seemingly get any worse, and finally the USD is proving to lose its appeal with regards investment and therefore we are seeing a slow down in the move to sell off AUD.

Opinions are somewhat divided amongst analysts regarding AUD strength over coming months.  Some believe there is some more serious underlying problems that could emerge from within Australia and the middle of the road data we have seen to date is not in so much reflecting an economy that is surviving better than others but more the fact that there is a delay in the global problems filtering through.  On the flip side there is a reasonable argument to suggest that if the GDP data in Australia does continue to be better than elsewhere and if China manages to kick start its economic growth then the Australian economy and the AUD could ride out the current turmoil better than most.

The week ahead:


Wednesday 10th Dec -Terms of Trade Index (3rd Quarter)

Thursday 11th Dec – Business NZ PMI (Nov), Food Prices (Nov)

Friday 12th Dec – Retail Sales (Oct), Retails Sales ex-auto (Oct)


Tuesday 9th Dec – NAB Business Confidence and Conditions (Nov), Reserve Bank Governor Stevens speaks in Sydney.

Wednesday 10th Dec – Westpac Consumer Confidence (Dec), Home Loans (Oct), Investment Lending (Oct)

Thursday 11th Dec – Consumer Inflation Expectation (Dec), Unemployment rate (Nov), Employment change (Nov)



The start of the week saw GBPNZD trade at 2.82 which was close to the high for the week.  Overnight on Monday 01st the rate traded up to 2.84 during UK trading hours and thereafter for the remainder of the week and with the lead in to the UK and NZ interest rate decisions the rate dropped away hitting the low for the week on Thursday at 2.72.  We saw a slight recovery to the 2.75’s on Friday which is where it has continued to trade at the outset of this week.

The data from the UK was on the whole weaker than expected which accounts for some of the negative movement in the week.  For instance last Wednesday’s Nationwide Consumer Confidence fell to its lowest since records began on the back of unemployment and curtailed credit.

We expect the rate to continue in its current mid 2.7 band but with slight potential to peak up to 2.8 in similar quick moves that have come about over the past few weeks.  However there is a resistance level at 2.82 that unless we have some very negative NZ data or positive UK data the rate will struggle to break higher.

The week ahead in the UK:

Monday 08th – Producer Price Index (Nov)

Tuesday 09th – NIESR GDP Estimate (Nov), RICS House Price Balance (Nov), Goods Trades Balance (Oct), Industrial Production (Nov), Total Trade Balance (Nov)

Thursday 11th – CBI Industrial Trends, Inflation expectations



We started last week at GBPAUD 2.36 which was the peak for the week.  Thereafter the pair slid down throughout the week to hit the low on Thursday at GBPAUD 2.25 before recovering a fraction on Friday.

Despite an interest cut on Tuesday in Australia the GBPAUD rate moved against Sterling for the majority of the week.  Undoubtedly the UK’s own looming interest rate cut last Thursday was the culprit.

Looking forward there seems to be renewed strength for the AUD that may well see us trading in the ‘middle ground’ for the coming week – the 2.2’s were a lofty dream over 5 months ago but seem decidedly average now given the October spike.

For upcoming UK data see GBPNZD above.



Last week was quite a jumpy one for EURNZD – the outset saw the pair trading at 2.36 rising to 2.4 on Wednesday but then with the cut in interest rates in the Eurozone it dropped to the low for the week trading in the 2.35’s before surging back up to the high for the week on Friday at 2.41+.

The Euros strength is not underpinned by the domestic data – last week saw all of the domestic data come out below expectation and the ECB cut interest rates by 0.75% however the larger cut in interest rates in NZ has clearly kept the rate pushing to the highs for the year so far and we expect this to continue into the coming week.

The economic week ahead in the Eurozone:

Monday 8th – Industrial Production (Germany), ECB Trichet’s Speech

Tuesday 9th – Trade Balance Oct (Germany), ZEW Survey (Dec)

Thursday 11th – ECB Monthly Report (Dec)

Friday 12th – Industrial Production (Oct), Labour costs (3rd Quarter)



At the beginning of last week EURAUD started at 1.9580 rising midweek to 1.9850 before falling back a touch on Thursday to 1.9550.  Friday however saw the pair jump back up again to touch EURAUD 2.0 before dropping back down to start this week in the 1.95’s again.

The ECB’s interest rate cut of 75bps was slightly more than the 50bps expected which accounts for the slight dip in the rate in the latter stages of the week.  In the upcoming week we anticipate a continuation of the EURAUD 1.94 – 1.98 range.

For the economic week ahead in the Eurozone please see EURNZD above.



Started last week at 0.54 on Monday and then from Tuesday onwards the pair traded in a tight range between 0.5250 and 0.5350.

There was a mixed bag of results for the US domestic data last week but by and large the picture continues to be one of negativity however the USD has retained its strength.  Unemployment and Average earning figures coming out stronger than expected certainly would have helped but the pressure on NZD mainly came about through the interest rate cut in NZ.

The US is officially in recession and has been for some time according to recent reports, and downside risks to growth remain.  Ben Benanke has acknowledged that the US economy will ‘likely remain weak for some time’ however unlike other central banks the Fed now has little room to maneuver with interest rate cuts, but he was optimistic that the US’s provision of liquidity remains effective.  Nonetheless we still expect there to be a backlash against the current USD strength in coming months however for now the NZ economy is still facing similar prospects to that of the US so we anticipate in the short term that the 0.52 level could be tested.

The economic week ahead in the US:

Tuesday 9th – Pending Home Sales (Oct)

Wednesday 10th – MBA Mortgage Applications, Monthly Budget Statement (Nov)

Thursday 11th – Import Price Index (Nov), Trade Balance (Oct)

Friday 12th – Producer Price Index (Nov), Retail Sales (Nov), Business Inventories (Oct)



In a similar capacity to NZDUSD the AUDUSD rate moved in a tight range last week barely breaking moving outside of 0.6340 to 0.6480.

We expect the AUDUSD rate to continue in a similar range this week.  Unless commodity prices recover it is unlikely that we will see the AUD strengthen significantly in the short term.  Likewise with USD domestic data continually coming out weaker than expected the USD may struggle to strengthen further so a stalemate has been reached.

For the coming weeks data in the US see NZDUSD above.



Last week went almost all the AUD’s way in this pairing having started the week at 1.192 and steadily climbing against the NZD to finish the week at 1.21.  Having seen a bit of a deadlock between the pair of late the current move is somewhat unsurprising given that the 3rd Quarter data in Australia was basically flat but in NZ it shows signs of an economy heading backwards.  We expect the rate to continue to move in AUD’s favour over the coming week.


Please feel free to contact me ( 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.