Morning Report

The Rose-Tinted Kiwi Thursday, 9 September, 2010 Markets pared back concerns for European debt overnight allowing the local currencies to edge back up towards the recent highs set earlier in the week; the Kiwi is trading back above 0.72 this morning, not up quite as much as the AUD which sees the NZDAUD cross just duck back under 0.7900. ... [more] Euro Woes Curb Kiwi, RBA Holds Wednesday, 8 September, 2010 Fresh concerns over the state of European debt took the shine off the recent rally in the locals overnight; the Kiwi eased back a quarter-cent to sit right on 0.72 against the US$ this morning. The Euro was the hardest hit currency against the US$ as the spread between 10-year government debt in Ireland and Portugal, two familiar names on the list of troubled Euro economies, and Germany grew to its widest margin yet (remember that because this debt is all issued in Euro, the different interest rate on the same length debt basically reflects the markets fear an issuing nation will default).... [more] Kiwi Outperforms; RBA at 4:30 this afternoon Tuesday, 7 September, 2010 The NZD was one of the strongest performers overnight as it climbed about half a cent to sit in the low 0.72’s against the US$. The Aussie managed only a small gain against the US$, the GBP and EUR are marginally softer if anything, leaving most NZD cross rates stronger this morning. The most notable mover is the NZDGBP which is up half a cent to just under 0.47 this morning, its highest in over a month. Slightly softer housing data for the UK (an index showed prices declined by 0.5% from July to August) triggered concern the Bank of England would revisit discussion for further quantitative easing which would further dilute the Pound.... [more] Non-farms Excite; Quake Shakes Kiwi; RBA Tomorrow Monday, 6 September, 2010 After gaining on a weaker US$ over Friday night the Kiwi has opened about a quarter of a cent lower against the USD and AUD, marked down following this weekend’s earthquake in Canterbury. With the Treasury putting out early estimates for repairs around the NZD2 billion mark we will likely see some knee-jerk selling this morning, this certainly rules out any chance of a hike in the OCR in the near term. Bar any substantial interruption to business (all dairy farms in the region are back with power today), a NZ$2 billion rebuild will be a positive for GDP and for the struggling construction sector. NZD2 billion equates to about a 1% boost to GDP. ... [more] Australia Sells Less Dirt; Non-farms tonight. Friday, 3 September, 2010 The markets were notably quieter last night ahead of this evening’s non-farm payrolls data; equities were mildly positive at best, the Euro trod a tight range and the Pound was slightly softer as a house price index declined slightly more than expected. In the local markets; the Kiwi edged up half a cent against the US$ to 0.7150, the Aussie failed to build on yesterdays show of strength, hampered by much softer than expected trade balance data. This has allowed the NZDAUD cross to push off yesterday morning’s lows and back into the mid 0.78’s. ... [more] Spring Has Arrived Thursday, 2 September, 2010 A strong result from Australian GDP and positive manufacturing data from the US and China yesterday gave a big green light to risk buyers overnight, marking a very sharp change in sentiment from just a few days ago; the Nikkei rose 1.2% (after falling over 3% on Tuesday following the disappointing Bank of Japan meeting), stocks across Europe generally rallied around 3 to 3.5% and the S&P is currently up 3% as well. Some good news for New Zealand as well with prices at Fonterra’s milk auction up 16.9% on average; with Fonterra accounting for around a quarter of NZ’s exports, the dairy windfall looks set to continue. ... [more] Kiwi Down as Markets Baulk at South Canterbury Finance Wednesday, 1 September, 2010 The Kiwi was under pressure overnight due to the failure of South Canterbury Finance; the company entered receivership yesterday morning, and as the front page of any news paper today will tell you, the Government has stepped in under the Deposit Guarantees Act to backstop deposits and isolate any fallout for the broader economy. The Government has gone beyond its duty in order to become the first-ranked creditor, allowing greater flexibility in managing the assets it has taken over; basically this prevents a fire sale, limiting fallout on the price of other assets in the economy. ... [more] Japan Disappoints, China Disappears and Risk Retraces Tuesday, 31 August, 2010 Markets moved away from risk last night with stocks across Europe and the US loosing ground and the Euro, Pound, Aussie and Kiwi all slipping back against the safe-haven US Dollar. News stories point to slightly softer personal income and manufacturing data in the US although a weaker than expected trade balance for NZ yesterday morning and a relatively sharp fall in NZ business confidence saw the Kiwi softer through yesterday’s session. New Zealand ran a trade deficit of NZD186 million in July (against expectation of a NZD40 million deficit), annually NZ produced a NZD573 million surplus; this is a vast improvement from the almost NZD6 billion shortfall just 2 years ago. The business confidence index declined from 32.4 to 25.7 and firms own outlook eased from 27.9 to 16.4.... [more] Markets Rally as Fed Talks the Talk Monday, 30 August, 2010 The weekends meeting of Central bankers at Jacksons Hole, Wyoming has given the market what feels like a rare opportunity to rally over the weekend as the Fed reiterated its commitment to stimulating the economy should the recovery continue to falter. US GDP was revised down to 1.6%, down from the 2.4% annualized rate previously measured, but better than the 1.4% expected. US stocks are up 1.65% and the US$ is down against the Euro, Kiwi and Aussie. The Kiwi has gained over half a cent since Fridays trading to sit above 0.71 this morning, the Aussie is up by a slightly larger margin to just under 0.90 leaving the NZDAUD cross back to the bottom of the recent range in the low 0.79’s. The Pound was one of the few currencies not to gain against the US$ as softer trade balance data kept a lid on its appeal. ... [more] Is the Tide Turning on the US$? Friday, 27 August, 2010 No one general trend in the markets last night; US equities continued to sag while most currencies gained against the US$. The Kiwi clawed out of the 0.69’s and back into the low 0.70’s where we have seen it for much of this past week, the Aussie climbed by a similar margin against the US$ which leaves the NZDAUD cross steady in the low 0.79’s. ... [more] Kiwi Pushes through US$0.7000 Thursday, 26 August, 2010 The Kiwi has dipped under 0.70 this morning, its lowest level in almost 2 months, as continued pressure from investors paring back risk appetite reduced demand for the local currency. With the Aussie dollar being harder hit over the past few sessions it was the Kiwis turn to play catch up, causing the NZDAUD cross to trade in the low 0.79’s this morning. Ratings agency Standard and Poor’s downgraded Ireland’s credit rating on concern the cost of supporting Irelands struggling banks will blow out the nation’s budget deficit. This sent the Kiwi down sharply yesterday morning for a brief time and sent a shudder through Asian and European stock markets.... [more] US Houses Drive ‘Double-Dip’ Fears Wednesday, 25 August, 2010 Another bump in the road for the US housing market has triggered a wave of selling risk assets overnight. Data showed that the annual number of house sales fell to 3.83 million rate in July. This is 27.2% less than what was recorded in June and the lowest annual sales volume on record. The US housing market is suffering from the expiry of first home buyer tax breaks, an oversupply of houses, tight credit and high unemployment. There is now 12.5 months worth of houses for sale in the USA, the most since 1983.... [more] Drifting Out of Risk Tuesday, 24 August, 2010 Quiet but risk averse seems to be the theme for the markets recently; global equities continued to drop in Asia and America and currencies were generally softer against the US$ and Yen; the Euro slid to its lowest close in 2 months. The Kiwi and Aussie spent much of yesterday grinding back to the post-Australian election drop only for the Kiwi to slump back 0.7050 (and the Aussie to 0.8920). Looking ahead to the week and the key offshore event will be the second reading of US 2Q GDP released on Friday night; ahead of this announcement we are expecting the general drift out of risk to continue.... [more] Hung Parliament Drives Currencies Lower Monday, 23 August, 2010 No clear winner in the Australian election race has seen the local currencies open sharply lower this morning; after a weak Friday night the Aussie was marked down a further half cent against the US$ on the open to around 0.8850, the Kiwi has been dragged down almost half a cent as well to around US$0.7050 pushing the NZDAUD cross up to 0.7950. ... [more] Disappointing US Data Sees Locals Lower Friday, 20 August, 2010 Poor US economic data saw the locals fall back down toward the lower end of this week’s range overnight; the Kiwi lost around half a cent against the US$ to sit in the high 0.70’s, the Aussie was again a little more reluctant to be pushed around ahead of the weekends election. The NZDAUD cross gave up some of yesterday’s gains; the pair is trading in the low 0.79’s this morning. In other markets; the Euro and Pound were stable against the US dollar (not much action during the traditional European holiday season) and US equities were down 1.5% off the back of the poor economic data. One potential source of volatility for the currency markets this weekend will be the Aussie election; there is an outside chance of a hung parliament or some other upset which could cause a turbulent Monday morning.... [more] Kiwi Up Across the Board Thursday, 19 August, 2010 The Kiwi was up again last night except this time it was not just against the US$; the Kiwi has risen against the Pound, Euro and Yen overnight, but most notably against the Aussie dollar where the Kiwi has climbed a full cent to trade in the mid 0.79’s this morning. Both the Kiwi and Aussie were initially strong risers against the US Dollar last night (the Kiwi at one stage trading all the way up to just shy of 0.72) although the Aussie dollar was unable to hold its gains ahead of this weekend’s big election and as a result has seen the NZDAUD cross rebound strongly from the lows. ... [more] Markets Bounce; What to do About America? Wednesday, 18 August, 2010 A rally in global equities overnight has renewed risk appetite in the currency markets; with stock markets up between 1.5 and 2% across Europe and the US, the Kiwi gained about half a cent against the Greenback to sit in the low 0.71’s this morning. The rally comes following successful debt auctions for Ireland and Spain held overnight, also mining giant BHP made a US$39 billion offer for the world’s largest fertilizer producer Potash Corp, a timely spark of life for the market. The Aussie dollar also rebounded against the US$ (the BHP offer ensured commodity related shares were some of the strongest performers overnight) is keeping the NZDAUD under 0.79; exporters to Australia can currently achieve forward cover rates under 0.8000 right out to Christmas. ... [more] NZDAUD Cross Down Again; Obama Tonight Tuesday, 17 August, 2010 The markets remained wary of risk again last night with US stock markets heading slightly south, gold prices rising and yields on government bonds edging down as cash flocks to safety; US 10-year interest rates were the most notable mover with the yield falling to just 2.57%, their lowest return since March last year. The local currencies did not participate in the broad move lower and were instead supported by a glowing report on the outlook for commodities released by a major bank overnight. The positive view does not tie in with the recent turn down in manufacturing activity or the particularly patchy outlook for global growth, although good news has been rare this past week and the report was enough to lift the Kiwi over half a cent from yesterday’s push down to 0.7000; currently the Kiwi sits just above 0.7050 against the US$. ... [more] USD Strength Continues Monday, 16 August, 2010 The US dollar was stronger again over the weekend sending the Kiwi and Aussie dollars down slightly to around 0.7050 and 0.8925 respectively. Commodity and equity markets were roughly flat and the Euro and Pound are slightly softer. Several of the currencies we monitor all look to be coming off their highs against the US$ as wobbly global data drives safety-seeking cash back into US$; exporters should stand by for action should a more serious bout of strength appear for the US dollar. ... [more] Kiwi Down Again; Bank of Japan Warn Market Friday, 13 August, 2010 Markets were down against the US$ last night although not with the same fervor of Wednesday; the Kiwi lost almost half a cent from yesterday afternoon and global equity markets are mildly down (about -0.50% on balance, compared with the 2.5-3.00% falls on Wednesday). The Euro and Pound edged south as well. Interestingly the Aussie managed to hold its ground against the US$ last night, and with the weaker Kiwi, the NZDAUD cross has fallen back into the mid to low 0.79’s this morning. In NZ today we see the release of REINZ housing data (10.00 am) and retail sales (10.45 am), two areas under pressure as households concentrate on paying down debt. ... [more] Markets Down Sharply Against US$ Thursday, 12 August, 2010 There were sharp falls in most markets against the US$ last night on concerns the global recovery will falter; it seems the markets have finally decided to play catch up on the recent run of poor economic data. The Kiwi has lost a further half cent against the US$ to trade in the high 0.71’s, the Aussie lost more falling a full cent to US$0.90 but the Euro takes the prize for biggest decline for the majors losing over 2% against the US$ (and allowing the NZDEUR to gain half a cent in the process). The losses were not confined to currencies as equities are a sea of red this morning; Japans Nikkei closed down 2.7%, European bourses declined at least 2.5% and the US Indexes are currently down almost 3%.... [more] Fed to Support Government, Not Housing Wednesday, 11 August, 2010 The US Federal Reserve this morning kept US interest rates on hold at 0.25% but moved further to support the economy by announcing plans to reinvest cash into Government debt. Last year, in the midst of the Financial Crisis, the Fed bought USD 1.75 Trillion worth of debt (US$300 billion of Government debt, US$1.45 Trillion in Mortgage debt) in the open market. This increased its balance sheet by the same amount. Now, as some of those investments mature, the Fed has decided that rather than let its balance sheet shrink back down over time, they will reinvest the maturing money into Government debt only. Markets have reacted positively to the news with the US S&P500 currently down half a percent, this market was down as much as 1.5% prior to the announcement, and the Kiwi has bounced back from an overnight low just below 0.72 to trade at 0.7250. ... [more] All Eyes on Bernanke Tuesday, 10 August, 2010 It was a relatively quiet night in the currency markets as most attention falls toward tomorrow mornings Fed announcement (6.15 am NZ time); the trade de jour of late has been selling US$, a progressively weaker USD has kept the Kiwi supported around US$0.7300 for the past 2 weeks (while the NZD has gradually lost ground against the GBP, EUR, JPY and AUD). The Kiwi fell lightly into the high 0.72’s overnight as USD selling activity cools ahead of tomorrow morning, the Aussie slipped back as well but by a smaller margin holding the NZDAUD rate under 0.80 for Exporters. ... [more] Kiwi Back Above US$0.73 as Non-Farms Soften Monday, 9 August, 2010 The Kiwi was back up above 0.7300 over the weekend as non-farm payrolls dragged down the US$. The Aussie was up as well, pushing through to fresh 4 month highs against the US$, for a brief time trading as high as US$0.9200. In fact, the US$ was weaker right across the board, losing ground against the GBP and EUR as well, the Kiwi is slightly softer against each of these currencies this morning. In our view the markets are due for some sort of shake out as values for risky assets have not reflected the recent downturn in the economic data. While the US non-farms disappointment was evidently not the tipping point for a broad ‘risk-off’ move, we still see a move back towards 0.70, possible below, as a real risk for the Kiwi. ... [more] NZ Unemployment See’s Kiwi Down Sharply Friday, 6 August, 2010 The Kiwi fell sharply following yesterdays NZ unemployment data; unemployment rose to 6.8% in Q2 according to yesterdays release by Stats NZ. The market was looking for something around 6.2%, mildly up from Q1’s 6.0%. The data is not as dire as perhaps the headline suggests; most of the jobs lost were part time, full time employment actually rose slightly and hours worked increased slightly. Stats NZ wrote “the recent volatility in unemployment estimates is making it more difficult to interpret the results. The underlying or trend unemployment rate, which excludes seasonal and unexpected changes, can be used to help understand labour market conditions. At 6.7 percent, the trend unemployment rate has been relatively flat since September 2009”. On balance, little has changed in the unemployment market for some time and the highly volatile headline number (which has fallen from a peak of 7%, then to 6% and now back to 6.8% over the last three quarters) exaggerates the fluctuations. ... [more] AU Trade Surplus Hits Record; NZ Unemployment at 10.45 Thursday, 5 August, 2010 The Aussie was the stronger performer overnight following record trade data; the trade balance in June came in at A$3.54bln, double expectations of A$1.8bln and the largest monthly surplus since records began in 1971. Imports were little changed for the period but exports rose 7% driving the lion’s share of the surplus. The data highlights the divergence in the AU economy. Activity and leading indicators have retraced recently as the interest rate hikes curb consumer activity, while high commodity prices for exports provide strong stimulus for isolated parts of the economy.... [more] Special Focus: Is the USA the next Japan Wednesday, 4 August, 2010 Today we take a look at one of the longer term themes that have been on our minds over the last few months and that is the ongoing worry that the US economy is slowing turning into the next Japan. ... [more] RBA Confident as Clouds Gather in US plus Special Report Wednesday, 4 August, 2010 he Kiwi and Aussie have risen overnight following yesterdays forward-talking RBA interest rate announcement; the Kiwi is up to trade in the mid 0.73’s against the USD this morning, the Aussie is back testing recent highs in to low US$0.91’s while the NZDAUD cross is slightly up from yesterday morning following some soft Aussie economic data released pre-RBA yesterday (discussed below). The Euro and Pound continued their advance against the US$ overnight, the Pound has now climbed against the US$ for 9 days straight, its longest winning streak 18 years. ... [more] Locals Up; RBA at 4:30 Today Tuesday, 3 August, 2010 A surge in US equity markets lead Kiwi and Aussie buyers back into play last night; Americas ISM manufacturing survey is the first data for some time to beat market expectations, also a separate survey showing construction spending is expanding at a modest pace positively surprised. The ISM manufacturing gauge fell from 56.2 to 55.5, beating expectations of 54.5 (greater than 50 signals expansion). Not so bullish was the ISM ‘new orders’ index, considered to be a leading indicator, which declined to a one-year low. US stocks are up over 2% this morning, the Kiwi and Aussie both added half a cent against the US$ and the NZDAUD cross is steady just above 0.80 ahead of this afternoons RBA announcement (4:30pm).... [more] Kiwi Up Despite Greenspan’s Concern Monday, 2 August, 2010 The local currencies were just a touch firmer over the weekend despite US GDP undershooting expectations; second quarter annualized growth was 2.4% vs 2.6% expected, this was enough to take the shine off an earlier advance in equity markets. Sentiment was not aided by doom and gloom comments from Former Fed Chairman Alan Greenspan who said the current stumble in the data “feels like a quasi-recession” and that a “double dip” recession “is possible if home prices go down … that would induce a major increase in foreclosures, foreclosures would feed on the weakness in prices, and it would create a problem”. We note that risk-sensitive markets are beginning to look shaky given the recent run of global data that has missed expectations, Friday nights US GDP is simply the latest in the current trend. ... [more] RBNZ Remains Exporter Friendly Friday, 30 July, 2010 The Kiwi has managed to claw back some ground against the US$ following yesterdays soft RBNZ statement ahead of this evenings US Q2 GDP announcement. Concerns are tonight’s second quarter GDP numbers will become the latest in a growing trend of US economic releases that have disappointed the market, expectations are for the data to show annual growth of 2.6%. (Q1 has been revised down to just 2.7% from 3.2% initial estimate, both well down on the +5.6% rebound in Q4 2009)... [more] RBNZ Hikes but Dampens Expectations of Further Rises; Kiwi Down Thursday, 29 July, 2010 NZ interest rates were raised by 0.25% at this morning’s RBNZ OCR meeting, as was expected by the market. Where previously the RBNZ has expressed intention to gradually continue ‘taking the foot off the accelerator’ by raising rates in consistent 0.25% moves, this morning Dr Alan Bollard changed tact slightly, saying “the pace and extent of further OCR increases is likely to be more moderate than was projected in the June Statement”.... [more] Local Currencies Spike then Fall; AU CPI at 1.30pm. Wednesday, 28 July, 2010 The Kiwi rocketed up again vs. the US$ last night but this time the move was not to last; the Kiwi rose over half a cent, almost trading as high as 0.74 before falling back to the low 0.73’s this morning where much of yesterday’s time was spent. The Aussie too went from rapid ascent to sharp decline leaving the NZDAUD cross steady just above 0.81 ahead of the looming Reserve Bank announcements. The busy period of local data begins today with the release of Aussie inflation data for the second quarter; prices are expected to have increased by 1% from April to June which would take annual inflation to 3.4%, above the RBA’s upper limit of 3%. While the market is not expecting the RBA to hike at their meeting next Tuesday, inflation may prove to be an irritant for the RBA over the coming months and could see AU rate hikes closer to year end. ... [more] Kiwi Pushes to 6-month High vs. US$ Tuesday, 27 July, 2010 It was another night of gains for the local currencies as better than expected US housing data sent another wave of confidence round the globe. The number of New Homes sold in the US ran at 330k in the year to June, up 23.6% on the month prior, the market was expecting just 310k new homes to change hands. The jump in sales is a sign that perhaps US housing is moving past the decline caused as housing tax credits expire, but perhaps the market only had eyes and ears for good news last night; the markets ignored the fact previous home sales data was revised down over 30k for May (the lowest New Home turnover since records began in 1963) and also overlooked a Fed manufacturing survey that disappointed expectations. ... [more] Kiwi Up; EU Stress Tests Disappoint Monday, 26 July, 2010 The Kiwi and Aussie edged up again against the US$ over Friday night with each adding about a quarter cent from Fridays trade. The Kiwi currently sits just above 0.7250 against the US$ and the Aussie sits around 0.8950; the NZDAUD cross is holding steady ahead of the upcoming RBNZ and RBA announcements due on Thursday and next Tuesday respectably. The Kiwi is down against a stronger Pound which rallied on better than expected GDP numbers (UK GDP up 1.1% in the second quarter vs expectations of just 0.6%) while the Kiwi gained on the Euro as disappointing EU bank stress tests saw the Euro flounder.... [more] Kiwi Surges as Data Defies Bernanke Friday, 23 July, 2010 The Kiwi has jumped a full 1.5 cents against the US$ overnight as better than expected profit forecasts for some US corporations and a lick of positive data out of Europe, the US and the UK persuaded the market to overlook yesterdays warning by Ben Bernanke that the recovery may be coming unstuck. ... [more] Markets Down as Bernanke Says “Uncertain” Thursday, 22 July, 2010 Comments from Fed Chairman Ben Bernanke weighed on the markets last night, causing the Kiwi and Aussie to peel back half a cent against the US$. In a testimony to the Senate Banking Committee, Bernanke said that while the Fed plans to eventually remove the emergency stimulus, “we also recognize that the economic outlook remains unusually uncertain … we will continue to carefully assess ongoing financial and economic developments, and we remain prepared to take further policy actions as needed” although Bernanke did not elaborate on what further action may entail. ... [more] Kiwi Pushed Up by RBA and China Comments Wednesday, 21 July, 2010 The whippy sideways trading continues for the local currencies with both the Kiwi and Aussie dollars gaining swiftly against the US$ last night; the Kiwi has added a full cent to trade in the mid 0.71’s this morning.The Aussie has clawed back similar ground to trade just above 0.8800, leaving the NZDAUD cross at the lower end of its recent range just above 0.8100. NZ migration data is due to be released at 10.45 this morning.... [more] Kiwi Down as Traders Ease RBNZ Expectations Tuesday, 20 July, 2010 The Kiwi continued to slip back against the Greenback, Aussie, Euro and Pound during the last 24 hours whereas most of the other major currencies and stock markets were either flat or just a touch softer. It seems that some of the cash that was so eager to push up the Kiwi over the last 2 weeks is making for the exits hence greater selling in the Kiwi than in its peers; the change of heart looks to be traders marginally reducing expectations of RBNZ interest rate hikes, a further 1.16% over the next 12 months is expected which would take the OCR to approximately 3.91%. Previously and extra 1.22% was priced in, the market will receive guidance at the next RBNZ meeting on July 29th.... [more] Kiwi Stumbles on Fragile US Consumers Monday, 19 July, 2010 The Kiwi starts this week around 0.71 against the US dollar, down almost 2 cents from Friday mornings dig up toward 0.73. The decline comes as global equity markets continue to falter, compounded on Friday by poor US consumer confidence numbers. ... [more] Kiwi Jumps against USD and AUD Friday, 16 July, 2010 Big moves in the currency markets last night led by the Euro and Pound which bolted up against the US dollar, the Kiwi has rallied strongly against the weaker US$ climbing a further half cent to 0.73 but losing ground on the NZDEUR and NZDGBP cross rates. The Kiwi outperformed a struggling Aussie which sees the NZDAUD cross rocket to 0.8250, its highest level since a brief push toward 0.83 in September last year. Oddly enough European and Asian share markets fell and US share markets remain relatively flat despite the performance of the currencies. NZ CPI is due at 10.45 this morning; prices are expected to have increased 0.4% in Q2 and at an annual rate of 1.9%.... [more] Somber Fed Minutes Can’t Stop Kiwi Thursday, 15 July, 2010 Onwards and upwards again for the Kiwi last night, in fact, the Kiwi seems to be an outperformer given that US equities and the Aussie dollar have not put on an equally impressive performance. The Kiwi has added almost half a cent from yesterday’s open to a high of almost 0.7250 overnight (sitting back off a touch from there this morning). The Aussie was relatively stagnant around yesterdays open allowing the NZDAUD to push back up toward 0.82. As we have mentioned previously; there is a risk that in Australia, inflation pressures may force the RBA to hike interest rates earlier than what is currently being expected by the market and this would put pressure on the NZDAUD cross rate. In this vein, importers may want to consider increasing cover on rallies such as this, perhaps including some Orders around 0.82 to take advantage of brief spikes up.... [more] US Earnings Season Starts Well; Kiwi Jumps Wednesday, 14 July, 2010 The locals are up sharply against the US$ this morning, in fact, it was positive for risk right across the board last night with all the major currencies (bar Yen) pushing up against the US$. Stock and commodity markets plowed up and bond prices fell. The rally actually began during NZ time yesterday morning with news that Aluminum giant Alcoa, the first major US Corporation to release earnings, beat the pessimists and announced earnings above market expectations. With so many investors eagerly awaiting guidance from the US corporate earnings season, Alcoa’s canary in the coal mine positive result has encouraged cash back to risk. Also aiding sentiment was news that Greek banks were able to issue debt at a cost below 5% interest, a positive but perhaps spurious sign of stability. The Kiwi has slightly outperformed its peers in the rally leaving it slightly firmer on the cross rates, most notably against the AUD which has gained half a cent to sit above 0.8150 this morning.... [more] Markets Gearing Up for Earnings Season Tuesday, 13 July, 2010 Most of the currency moves came out of Europe and the UK overnight with both the Pound and the Euro weakening against the US$ and the local currencies overnight. The Pound struggled after comments from ratings agency Standard and Poor’s who warned the UK that “the general government debt burden may approach a level incompatible with the nations AAA long-term credit rating”. While the threat of a downgrade is limited at this stage, the comments do remind the market of the UK’s unsavoury fiscal position and this was enough to see the Pound slip against its trading partners. The locals were relatively flat against the US$ around 0.7100 for the Kiwi and 0.8750 for the Aus and the NZDAUD cross is flat, still trading around the low 0.81’s.... [more] Kiwi Edges Up, Pound Edges Down Monday, 12 July, 2010 A relatively quiet night in the currency markets over Friday night; the local currencies eased up a touch against the US$ while the Euro just edged off recent highs. The Pound was the biggest loser on the Friday night session giving up around 1% following some disappointing trade balance data and softer than expected manufacturing activity. The May visible trade deficit expanded by over GBP8 billion bounds vs expectations of a GBP7 billion deficit. The Kiwi advanced by half a cent on the Pound cross to just over 0.47 this morning, back to within a few cents of the absolute highs. ... [more] Aussie Surges as Unemployment Drops Friday, 9 July, 2010 The locals advanced against the US Dollar again in overnight trading with the Aussie leading the charge. The AUD has added a cent to sit at US$0.8750 since yesterday morning, much of the move coming off the better than expected AU unemployment data released yesterday afternoon. This has dragged up the NZD as well which is almost a cent better off for the last 24 hours, sitting just under 0.71 this morning - the NZDAUD cross has dropped back under 0.81.... [more] Kiwi Jumps on Global Equity Performance Thursday, 8 July, 2010 A big rebound for the local currencies overnight off the back of some positive data from US consumers and news that the EU will run and publish stress tests on the banking system; the Kiwi has pushed up over 1 cent from the overnight low to trade in the low 0.70’s this morning, the Aussie has risen almost two cents to sit at 0.6850 vs. the USD. The Aussie was slightly favoured vs. the Kiwi overnight due to the RBA’s Tuesday interest rate announcement which the markets have taken to show the door is open for further hikes in Australia this year.... [more] Locals Lifted; RBA Holds Wednesday, 7 July, 2010 The Kiwi and Aussie start the day up on yesterday morning’s open at 0.6930 and 0.8515 respectively. The locals initially came off during our session, marking the return of the Asian markets who laid low on Monday with the US Bank holiday. By the end of our day though the negative sentiment had passed and Asian, then European stock markets rallied strongly lifting the local currencies with them (many European exchanges up as much as 3%). The US markets were not to follow suit with rallies of their own after the ISM manufacturing survey, a close barometer of US GDP, declined by more than expected, leaving markets suddenly less confident.... [more] Markets Quiet with US Break; RBA at 4:30. Tuesday, 6 July, 2010 Markets were relatively sedate overnight with the Americans out for Independence Day; the Kiwi traded roughly sideways around 0.6900, the Aussie is just a touch softer sitting just shy of 0.8400 this morning leaving the NZDAUD cross up slightly at 0.8200. Most markets were moderately down if they moved at all, weakened by comments from ECB President Trichet urging austerity; investors are already jittery about slowing global growth following softer data from the US recently (namely unemployment and factory orders released last Friday), additional government austerity would further dampen expectations for global growth.... [more] US Unemployment Declines, So Does Kiwi and Aussie. Monday, 5 July, 2010 It was a mixed bag for the markets over the weekend with the Euro and Pound strengthening slightly against the US dollar but with equities, commodities and the local currencies all finishing a touch softer. The Aussie dollar had initially rallied as Australian Prime Minister Julia Gillard announced a watered down version of the unpopular mining tax, then a good result from US non-farm payrolls continued to lift the locals overnight. The Kiwi and Aussie were at one stage as high as 0.6980 and 0.85 vs the US$ on Friday night before some less positive US Factory Orders data dashed the optimism, turning equities negative and leading the locals down 1 cent each.... [more] USD Weakens on Growth Outlook, NZD Bounces Friday, 2 July, 2010 The US Dollar weakened overnight as weaker than expected economic data weighed on the US growth outlook. The USD fell against most currencies with the NZD bouncing back towards .6900 after yesterdays drop towards .6800. Weaker than expected manufacturing data, falling home sales and more people claiming the unemployment benefit all cast a shadow over the second half economic performance of the US economy. The Institute for Supply Management’s manufacturing gauge fell more than expected dropping to 56.2 for June down from 59.7 in May. A reading above 50.00 signals expansion. Sales of existing homes fell by 30% in May as the Governments first time home buyer grant had expired, however this grant has now been extended through to the end of September so may breathe a bit more life into the housing market, although clearly this market is still struggling without Government support.... [more] Kiwi Down Again as Risk Shunned Thursday, 1 July, 2010 There was another leg down for the local currencies last night, although the moves were not as violent as the drop over Tuesday night; after a gradual quarter-cent rally yesterday afternoon the Kiwi shed a further half cent to trade around 0.6875 this morning. The Aussie traded in a similar fashion against the US$ which leaves the NZDAUD cross rate steady around 0.8150. Risk aversion was not as widely spread as it was over Tuesday with US equities down about 1%, European indexes recovering a smidge of their previous plummet and Asian markets generally down a further percent as well. In the local markets, May retail sales and building approvals data is due to be released for Australia at 1.30 today.... [more] Kiwi Plummets on “skittishness and nervousness” Wednesday, 30 June, 2010 There was a global rout in markets last night as cash fled to the relative safety of the US dollar; the general pattern of risk aversion that has been building over the course of the week was exacerbated by a very disappointing US consumer confidence survey released last night (index at 52.9 vs expectations of 62.5). Also disappointing the market was a revision to Chinese Leading Indicators which was restated at +0.3% vs a previously measured +1.7%. Summed up by President Barak Obama, who last night met with Fed Chairman Ben Bernanke, “unfortunately, because of the troubles we’ve seen in Europe, we’re now seeing some headwinds and skittishness and nervousness on the part of the markets”.... [more] Kiwis Remain Confident In Recovery Tuesday, 29 June, 2010 A quiet night for the currency markets as they struggle to decide if the next move is further gains against the US$ or if perhaps the rally has run its course and now is the time to make for the exits. For our European cross watchers the NZDEUR sits back at last week’s highs in the upper 0.57’s while the NZDGBP has pulled back a touch to trade under 0.47. Interestingly the Pound has been one of the stronger performing currencies the past month, managing to climb 6% against the US$ (the Euro has risen 4% over the same time frame) and pushing the Kiwi and Aussie down over a cent on the cross. Last night’s Pound strength comes as the G20 moves away from coordinated bank taxes, a policy that would crimp the finance industry dependant UK economy more than most.... [more] Locals Up On Change in US Reform Monday, 28 June, 2010 A big swing for the Kiwi over the weekend; after trading as low as 0.6990 shortly after close of business on Friday the Kiwi has since rebounded right back up to recent highs around 0.7140. The same is true for the Aussie which traded as low as 0.8600 before gaining 1.5 cents to open this morning at 0.8740. The jump in the locals comes off the back of an important change in the US financial reform bill that was approved by the House and Senate on Friday; namely the ban on Banks involvement with hedge funds and private equity groups has been lifted to allow limited investment in such vehicles. Although it is not yet law, the local currencies were clear beneficiaries of the change, which effectively allows greater investment in “risky” assets than what would have been permissible under the previous version of the legislation. ... [more] Export Led Recovery Continues Friday, 25 June, 2010 There was a bit more pressure on the local currencies last night as the previous few weeks’ worth of rallying continues to falter. The Kiwi shed almost half a cent to trade in the upper 0.70 region and the Aussie fell just a touch further to trade just above the mid 0.86’s against the US$ this morning. With the Kiwi holding slightly stronger against the USD, the NZDAUD cross was able to push up slightly to be just shy of 0.82 this morning. The bearish sentiment was not limited just to the locals; US stocks are down just over 1.6% due to a few missed earnings estimates from some US retailers and a bit of pressure on bank stocks as anyone with an exposure to European lending faces still rising costs to insure debt. ... [more] NZDAUD Jumps as Rudd Faces Challenge; NZ GDP at 10.45 Thursday, 24 June, 2010 The Euro, Kiwi and Pound crept tentatively up against the US$ last night, beating off a disappointing new US home sales announcement (300k new homes were sold in May vs. expectations around 410k) and a more cautious tone from this morning’s FOMC meeting. Next on the cards is the Q1 NZ GDP announcement at 10.45 this morning; the market is looking for a 0.6% expansion which would take the annual rate of growth to 1.9%. The Kiwi currently sits around the 200-day moving average at 0.7140 vs the US$, still providing an opportunity for US$ importers. ... [more] Kiwi Down Slightly Against USD Wednesday, 23 June, 2010 Most currencies drifted off against the US dollar last night; risk aversion was aided by some slightly softer than expected US housing data, but also as buyers become more reluctant to enter the market at the risk of most of the recent rally being behind them. The Kiwi and Aussie took a half-cent knock each against the USD to trade around 0.7050 and 0.8750 respectively, the Euro and US stock markets are also down.... [more] Chinese Yuan Rises, NZD Gives Up Gains Tuesday, 22 June, 2010 The Chinese Yuan rose to its highest level in two years overnight as the Bank of China allowed more flexibility in the exchange rate. Earlier yesterday there was some initial confusion in the market as the reference rate set by the Chinese central bank was left unchanged. However as the trading day wore on the Yuan was allowed to rise and ended the day 0.4% higher at 6.80 vs the USD from its previous peg of 6.83. The Chinese central bank has said that it will allow movements of +/- 0.5% each around the reference rate. So in order to get a sustained appreciation they will have to start rising the reference rate as time goes on.... [more] NZD higher as China moves to a more flexible exchange rate Monday, 21 June, 2010 China has announced plans to move towards a more flexible exchange rate over the weekend. The move signals an end to the two year fixed peg that China had held in an effort to ward off the effects of the credit crisis. With the Chinese economy running strongly at 10.0% per annum and inflation set to surge higher China has finally relented and moved to a more flexible exchange rate. As with most Chinese policies it will take time, but when the Chinese currency was appreciating previously it was rising at approximately 6.0% per annum. The current rate of 6.83 has been held since 2008.... [more] Euro and Pound Rise, Boosting demand for Risk Friday, 18 June, 2010 The Euro and the British Pound both made strong gains overnight boosting demand for “Risk” investments like the Kiwi and Aussie Dollars. The Kiwi traded at .7000 vs the USD and back at .8100 vs the AUD.... [more] Russia to Buy Australian Dollars, NZ Consumers more Confident Thursday, 17 June, 2010 Russia has announced plans to add the Australian and Canadian Dollars to its international reserves to combat the fluctuations in the Euro and the US Dollar. Russia’s international reserves, the worlds third biggest behind China and Japan, reached USD458.2 Billion in June. Russia has amassed huge reserves because of its Oil exports. Remember just twelve years ago Russia defaulted on its debt because it could not pay.... [more] Euro extends its Recovery Wednesday, 16 June, 2010 The Euro extended its recovery overnight pushing back above the key 1.2300 level vs the USD. Improving sentiment about the global growth outlook and a recovery in the share prices of many European Banks boosted the Euro. It seems the European Government debt crisis is abating for now and this will put pressure on the speculators who have sold Euro’s and bought other currencies as the Euro rebound could easily turn their profits into losses.... [more] NZD Brushes US$0.7000 Tuesday, 15 June, 2010 The New Zealand Dollar continued its recent rebound overnight trading up as high as 0.7000 vs the USD, nearly 4 cents above last week’s low of 0.6600. The main catalyst for the move has been a resumption of risk appetite in global markets as the Europe situation has started to diminish. The Euro itself traded to its best level in over two weeks, pushing back above the 1.2200 level. Whilst the situation in Europe will take a long time to resolve, for now it looks like the selling pressure on the Euro has eased and so we may see more of a rebound as speculators are forced to take profit. If the Euro stages a bigger rebound then this could well propel the Kiwi higher vs the USD.... [more] Kiwi Up, Chinese Currency the New Focus Monday, 14 June, 2010 Financial markets continued to stabilise on Friday night with the NZ Dollar regaining more ground vs most of its trading partners. The Kiwi tested 0.6900 vs the USD, rose back to 63.00 vs the Japanese Yen and pushed up to 0.8100 vs the AUD. The strong growth performances from China and Japan helped markets see past Euro’s woes and focus back on the expanding global recovery. Against this backdrop currencies like the Kiwi are seen as hot property with interest rates rising and strong global demand for our commodity exports.... [more] NZD Jumps on RBNZ, Global Markets Rebound Friday, 11 June, 2010 The New Zealand Dollar responded positively to the Reserve Banks interest rate rise yesterday initially jumping up nearly 1 cent vs the USD. The Kiwi got a further boost later in the day from stronger than expected Australian Unemployment data and a sharp rise in Chinese exports. This extra good news has seen the Kiwi rise further and start the day nearly 2 cents better than yesterday at 0.6850 vs the USD. Despite all major currencies rising against the US$ overnight the Kiwi is higher against all its trading partners, including against the Aussie Dollar were it is slightly firmer, trading just under 0.8100.... [more] RBNZ Raises Rates Thursday, 10 June, 2010 In a widely anticipated move the NZ Reserve Bank raised interest rates by +0.25% to 2.75% this morning. Interest rates had been at an extremely stimulative level over the past year to help the economy recover from the effects of the Great Financial Crisis. With the economy set to expand at over 4.0% this year, led by surging exports, the need for super stimulatory interest rates has passed. ... [more] Swiss Intervene Again to Support Euro Wednesday, 9 June, 2010 The Swiss National Bank (SNB) again intervened in the currency markets overnight by selling Swiss Francs and buying Euro’s, the Swiss are trying to prevent the Swiss Franc from getting too strong against the Euro which would undermine the competitiveness of Swiss companies. The SNB had intervened in May buying approximately 80 Billion Euro’s to try and weaken the Franc. The Swiss can keep intervening as long as they want because they can keep printing Swiss Franc to pay for their Euro purchases.... [more] NZD Down Sharply Ahead of RBNZ Tuesday, 8 June, 2010 The NZD starts the short week sharply lower from Friday after risk aversion swept through financial markets on Friday night. Ongoing concerns about the global growth outlook increased on Friday night when US jobs data disappointed the markets. US jobs grew by 431,000 but the majority of these were temporary workers hired by the US Government to conduct the upcoming census. This meant the private sector added just 41,000 jobs, well below the 158,000 estimate; the unemployment rate declined from 9.9 to 9.7%. Financial markets fell sharply on the news; world sharemarkets dropped around 3.0% on Friday and then more than 1% overnight last night, currency and commodity markets fell as well.... [more] Aussie Trade Surplus, Markets Fret over Europe Friday, 4 June, 2010 Markets resumed their worries over Europe with the focus this time on the state of the banks themselves. European Banks have deposited 320 billion Euro’s at the Central Bank, an amount which some assumed meant that Banks were wary of lending to each other and were relying on the Central Bank to facilitate the normal cash redistribution process. This is similar to what happened in the USA post Lehman brothers going broke; banks were too scared to lend to each other and all the US$ ended up at the Federal Reserve. One wonders if Europe needs another interest rate cut to stimulate the economy, although the weaker Euro will start to boost exports before too long.... [more] Yen Weakens on Political Uncertainty Thursday, 3 June, 2010 The Japanese Yen fell nearly 2% from late yesterday as news broke that the Japanese Prime Minister Yukio Hatoyama has resigned two months out from Japanese elections. The speculation is that Hatoyama will be succeeded by Finance Minister Naoto Kan; Kan has previously called for the Bank of Japan to do more to fight deflation and has publically voiced support for a weaker Yen. Higher-yielding currencies including the New Zealand dollar, Australian dollar and Brazil’s real rose overnight, the move has pushed the NZDJPY rate back above the 62.00 level (see graph below)... [more] Markets Volatile, NZD Well Supported Wednesday, 2 June, 2010 Financial markets experienced another volatile night with sharemarkets, commodities and currencies all trading in wide ranges before ending broadly unchanged. Weaker manufacturing data out of China initially prompted a sell-off in Asia which flowed on into Europe, however stronger manufacturing and construction data out of the USA turned things around and most markets recovered.... [more] NZ Business Confidence Points to 5.0% Growth; RBA at 4:30 Tuesday, 1 June, 2010 The latest National Bank business confidence survey results released yesterday show firms remain very optimistic about their prospects for the next six months. In fact firms own activity expectations (a strong guide to GDP growth) points to economic growth of 5.0% by year end. This strong reading reflects the recent run of positive data for New Zealand; Fonterra talking about an $8.00 payout for next season, April’s strong annual trade surplus and the Governments business friendly budget. Throw in an 8.5% jump in building consents and you have all the ingredients for a strong economic rebound.... [more] Spain Downgraded, Focus on RBA Monday, 31 May, 2010 Markets dropped back slightly on Friday after the credit rating agency Fitch downgraded Spain one notch from AAA to AA+. Spain’s credit outlook is now rated as “stable”. The rating agency cited concerns about Spain’s growth prospects as weighing on the countries debt to GDP ratio. The move by Fitch highlights the dilemma for the Eurozone countries battling large Government deficits. By cutting Government spending to curb rising deficits they are almost certain to lead to lower growth which in turn will make the debt burden bigger as a percentage of GDP. The recent weakness in the Euro may help alleviate the situation as a cheaper currency will make all of Europe more competitive.... [more] Markets Rebound As China Re-Affirms Support for Europe Friday, 28 May, 2010 Financial markets rebounded strongly overnight after China said it remains a long-term investor in Europe, damping concerns that the region’s debt crisis will worsen. Currencies, Share Markets and Commodities jumped and the US$ fell on the news. The Euro, which had been under pressure yesterday in early Asia trading, recovered nearly 3 cents vs the US$. The NZD has regained 2 cents vs the US$ and Yen (as has the Aussie Dollar) and regained ground against the Euro and Pound.... [more] Uncertainty Remains as Economies Recover Thursday, 27 May, 2010 Financial markets are showing the first sign of recovery as the Euro zone crisis is increasingly seen as a Euro zone only problem, leaving the rest of the world to get on with economic recovery. US economic data released last night showed an ongoing rebound with new home sales, durable goods orders and new mortgage applications all positively beating expectations. In fact the OECD has revised up its growth outlook for 2010 and 2011 on the better growth prospects for the USA and emerging economies including China.... [more] Markets Weaken on Spanish Bank Bailout Wednesday, 26 May, 2010 Markets have fallen back to the lows of last week overnight after moves by the Spanish Government to bail-out a regional bank, the CajaSur, which had got into trouble due to bad property loans. The CajaSur operated along the south eastern coast line of Spain known as the Costa del Sol. The area has experienced a massive boom in apartment and coastal developments throughout the 2000’s as Europeans, mainly English, flocked to the sun. With the property bubble burst many of the loans on these developments cannot be repaid and the bank was stuck with losses.... [more] Chinese Sell Aussie, US Housing Rebounds Tuesday, 25 May, 2010 Currency markets continued to consolidate after last weeks tumultuous declines with the kiwi holding steady around the 0.6750 level vs the USD. The NZDAUD cross has slipped back slightly towards 0.8100 after the AUD recovered from another bout of selling yesterday... [more] Markets Stabilse, NZD well supported Monday, 24 May, 2010 After a terrible performance over Thursday night and during Friday NZ time, financial markets around the globe stabilised on Friday night with US shares posting a gain for the first time in over a week. The market felt the Euro based sell-off in the markets, while fundamentally justified, had gone too far too fast and therefore wound back some of the more aggressive selling. The moves by the Swiss national Bank to intervene in the market (Selling CHF and Buying EUR) on Thursday night and rumors of ECB buying of the Euro have been enough to cause markets to question seeing the decline in the Euro as a one-way bet. ... [more] Huge Moves in Markets Friday, 21 May, 2010 Huge moves in the financial markets with currencies, shares and commodities all falling dramatically then staging a rebound on talk that the European Central Bank would intervene to prop up the Euro. ... [more] AUD, NZD Tumble, Swiss support Euro Thursday, 20 May, 2010 Both the Australian and New Zealand Dollars tumbled overnight losing about 3.0% to the USD as markets feared that anti speculation moves in Europe would curb demand for the “carry” trade currencies. Also weighing on the Aussie was a sharp drop in consumer confidence as the series of interest rate hikes across the Tasman bite into the household sector. The Kiwi’s fall was assisted by comments from RBNZ Governor Alan Bollard who said that a gradual decline in the currency would assist exporters and help rebalance the economy.... [more] AUD Falls on RBA, UK Inflation Rises Wednesday, 19 May, 2010 The Australian Dollar fell overnight after the release yesterday of the latest RBA Board meeting minutes; the minutes noted that “increases in interest rates to date had been timely” with signs that the moves were “beginning to affect behavior” of consumers and home buyers. The market has taken this as a signal that the RBA will now go on hold with interest rates. In New Zealand yesterday Producer Price inflation was on the rise with inputs rising +1.3% and outputs rising +1.8% indicating that businesses are restoring their margins. This should underpin the Reserve Bank’s decision on June 10th. This likely pause by the RBA and likely raise from the RBNZ has seen the NZDAUD cross rate back above 0.8000 this morning. ... [more] Kiwi Under US$0.70 Tuesday, 18 May, 2010 After the now usual Euro selling during our time zone yesterday the Euro has since recouped some losses as the ECB last night announced plans to accept 1 week term deposits from banks. The ECB will use the deposited money to purchase struggling Government bonds. As well as the threat of some nations defaulting and expectations of languishing Euro-area growth, markets were concerned that the ECB would engage in quantitative easing in order to fund the bond purchase program outlined as part of the bailout package. This small but rare positive for the Euro was enough to cause a rebound from yesterday’s 4-year low against the US$; the Euro fell one cent to buy US$1.2250 before recovering just over 1 cent overnight. ... [more] Euro, Commodities, Equities fall, US$ Gains Monday, 17 May, 2010 The Euro lost more ground on Friday night as concerns that the debt crisis across the region will not be contained continued to weigh on the 16 member currency. As the crisis roles on there is growing talk of the Euro breaking up and members reverting back to their original home currencies. In fact, such are the challenges facing the common currency that some form of break-up now seems plausible. Even if some of the weaker nations like Greece were to revert to their own currencies this could leave the core Euro concept as an economic cooperation intact; the question is how long the crisis will continue before this break-up point is reached.... [more] Pound, Euro Weak after more Budget Cut backs Friday, 14 May, 2010 The British Pound and the Euro were both weaker overnight after more budget cuts across both regions weighed on growth outlooks. In the UK the new Government said the coalition agreement commits them to significantly accelerating the reduction in the structural deficit. The new Chancellor of the Exchequer George Osborne told reporters after the meeting “there’s lots of work ahead. We’ve got a very difficult economic situation.” The budget deficit was a record 166.5 billion pounds last year and was forecast to be 163 billion pounds, or 11.1 percent of gross domestic product, for the current fiscal year, according to the U.K. Treasury’s budget. ... [more] Europe – The Low Growth Zone Thursday, 13 May, 2010 A quieter night in the world’s financial markets last night with the Euro holding steady close to the recent lows and the British Pound falling back after warnings from the Bank of England about growth prospects. The NZD and AUD both lost close to a cent vs the USD as markets worry about what China will do to slow down its property sector.... [more] Pound Rises on New Government Wednesday, 12 May, 2010 The British Pound rose overnight after news that the UK election has finally produced a new Government. Conservative Party Leader David Cameron is set to form a coalition Government with the Liberal democrats. The former Prime Minister Gordon Brown tendered his resignation to the Queen. The new Government will have a big job on its hands as it attempts to tackle the UK's surging public debt. The UK is expected to run a budget deficit of approximately 12% of GDP this year. The traditional opening of the books for the incoming Government could be a sobering exercise and markets may be less than impressed by the UK's financial condition. ... [more] Trillion Dollar Euro rescue Tuesday, 11 May, 2010 The members of the Euro zone have put together a Trillion Dollar Rescue plan for the Euro and the financial assets of its member countries. Most of the plan consists of Loan Guarantees but the ECB will buy both Government and Private debt in certain markets where there is severe tension. This saw the interest rates on Greek 10 year Government debt drop by 6% from 12.75% to 6.75%.... [more] Euro Rescue Plan Monday, 10 May, 2010 The saga in Europe continues to take centre stage in the markets; in response to the recent slide in the Euro (the Euro fell as much as 6% against the US$ last week) the European Finance Ministers over the weekend have met to put together a “stabalisation fund’ to be used to purchase Euro. The Fund (which they hope will be ready for market open in Asia today – 12.00 NZ time) has seen the Euro marked up about a cent against the US$ this morning to 1.2875 vs Friday nights close of 1.2725 and last weeks low of 1.2500. The Kiwi has been marked up half a cent to .7175 vs the US$ and the NZDAUD opens just above .8000.... [more] Markets Tumble; RBNZ Points to June; NZ Unemployment Drops Sharply Friday, 7 May, 2010 Markets have suffered heavy losses over night after the ratings agency Moody’s said lenders to troubled European countries face “very real, common threats”. The ECB appeared to sit on their hands at last night’s interest rate meeting. The ECB held rates at 1%, disappointing market hopes that rates would be cut and that the ECB would announce plans to directly purchase troubled sovereign debt. These measures should be implemented but unfortunately the Political structure of the Euro is very slow moving and seems unable to come up with a viable solution to the crisis, hence the Euro continues to get sold heavily. The longer it takes to come up with a solution the worse the crisis will become.... [more] Euro Down as Portugal Warned Thursday, 6 May, 2010 Sharemarkets around the globe dropped sharply again overnight as concerns mount over the financial fate of Greece and while Moody’s credit ratings agency contemplates another downgrade for Portugal. European Bank member for Germany Axel Weber spoke to the German Parliament warning them of a grave contagion across Europe if Aid was not provided to Greece, however in a latter speech in Stuttgart he said there were limits as to what Germany could do.... [more] Aussie Tumbles After RBA Goes on Hold, Euro Weakens Further Wednesday, 5 May, 2010 The Australian Dollar fell 2 cents overnight despite the Reserve Bank of Australia raising interest rates another notch to 4.50%. The reason for the drop is that the RBA gave a clear signal that they would now pause and assess what impact the 6 interest rate hikes will have on the Australian economy.... [more] NZD Higher on Commodity Prices, US Manufacturing Strong Tuesday, 4 May, 2010 The NZD has made further gains across the board overnight on the back of record high commodity prices. The ANZ Commodity Price Index rose to its highest level ever in April led by surging Dairy and Aluminium prices. The index, released yesterday afternoon, rose +4.9% from March in world price terms, even allowing for the stronger NZD prices were still +3.8% better. The strong commodity prices have led Fonterra to boost the Dairy payout and the Treasury has said strong commodity exports should see Q1 growth at 0.8%.... [more] Greece Finally Gets Bailed Out, China Tightens Again Monday, 3 May, 2010 Greece finally got some cold hard cash over the weekend as the Eurozone members agreed to a financial aid package that totals 110 billion euro. Euro members will pay 80 billion-euro and the IMF will pay the balance. In return for the funds which will be provided over three years, Greece has agreed to tough financial conditions that will see its budget deficit shrink back to less than 3.0% of GDP within the three years. This will most likely force the Greek economy to stay in recession for the whole three year period. It remains to be seen whether the people of Greece will accept such tough financial conditions. One wonders if three years is enough time to adjust and perhaps five years would have been a more realistic target. ... [more] Surging Exports Boost NZD Friday, 30 April, 2010 The highest ever export receipts for a single month boosted NZ’s trade balance for March to a gain of $567m and pushed the annual trade balance within a whisker of being positive. High world prices for NZ’s commodity exports combined with a super competitive exchange rate to our biggest trading partner Australia are contributing to the surge in Exports. Imports were up as well, reflecting a broadening out of economic growth, but Export receipts are growing at a much faster rate. ( see graph below)... [more] Bollard Expects to begin Raising Rates in Coming Months Thursday, 29 April, 2010 NZ Reserve Bank Governor Alan Bollard said “as previously indicated, we expect to begin removing policy stimulus over the coming months, providing the economy continues to evolve as projected”. This confirms that the first rise will most likely be in June as recent data flows point to a pick up in economic activity. Bollard said that because Banks are charging more for mortgages that the OCR will not have to be raised as much as in previous cycles. One wonders where the competition went in the Banking sector? And why the Reserve Bank is happy for the Banks to make increased margins from NZ Households?... [more] Euro on the Brink after Greece and Portugal Downgraded Wednesday, 28 April, 2010 The Euro currency moved closer to the brink of collapse overnight after the ratings agency Standard and Poors lowered the rating on Greece and Portugal. Greece was lowered to BB+ from BBB+ by S&P, which also warned that bondholders could recover as little as 30 percent of their initial investment if the country restructures its debt. The move, which rates Greek debt as “junk” grade and on a par with bonds issued by Azerbaijan and Egypt, came minutes after the rating company reduced Portugal by two steps to A- from A+. ... [more] Kiwi Jumps across the Board Tuesday, 27 April, 2010 The NZ Dollar is starting to regain ground vs the Australian Dollar as the market firms up its view of RBNZ rate hikes and question marks remain over future Australian Interest rate hikes. The Kiwi had struggled to keep pace with the Aussie over recent months and has traded down as low as 0.7600 vs on the NZDAUD cross rate. This was largely driven by the divergent paths taken by the two Reserve Banks, with Australia hiking in a pre-emptive manner and the RBNZ waiting for more signs of economic recovery.... [more] Euro Holds On, US Economy Surges Monday, 26 April, 2010 The Euro held together over the weekend after looking fragile on Friday night; the Group of 20 Finance Ministers meeting in New York created a positive backdrop for Greece’s ongoing emergency financing discussions. With much talk about Greek financial stability post stimulus, Greece is well placed to get the Euro 8.5 Billion it needs prior to May 19th when the existing debt is due.... [more] Euro Falls as Greek Deficit Worse than expected Friday, 23 April, 2010 The Euro dropped back to its recent lows after news the Greece’s budget deficit was worse than previously expected. Moody’s the credit rating agency cut Greece’s debt rating one notch to A3 and warned that ongoing delays in providing emergency funding to Greece meant it was unlikely that Greece would retain ratings in the “A” range. This pushed the yield on Greece’s 10 year debt to over 9.0%.... [more] IMF Upgrades Growth Forecasts Thursday, 22 April, 2010 The International Monetary Fund (IMF) raised its forecast for global growth this year to expand 4.2% in 2010, the fastest pace since 2007, compared with a January projection of 3.9%. The US economy is expected to grow 3.1% this year up from 2.7% previously. The IMF are picking the NZ economy to expand 2.9% this year and 3.2% next year. We note these numbers are well below the Reserve Banks picks of 4.1% for this year and 3.9% for next year.... [more] Is the Big Rebound Over? Tuesday, 20 April, 2010 Over the past year many financial market instruments have staged impressive rebounds from the extreme lows of March 2009. This has seen shares, currencies and commodities recover anywhere from 50-100% of the losses incurred during the Great Financial Crisis.... [more] Caution Returns to Markets Monday, 19 April, 2010 The NZD has slipped back below the 0.7100 US levels over the weekend but gained over a half a cent vs the AUD as financial markets dropped back to cautious mode after China’s cabinet raised minimum mortgage rates and down payment ratios for some home purchases. Chinese officials said “more forceful” steps are needed to cool speculation after property prices rose at a record pace in March. Australia is seen as the most sensitive to a slow down in China and hence the Aussie dollar fell more than the Kiwi. ... [more] China Growth Surges; Inflation Next? Friday, 16 April, 2010 China’s rate of economic growth surged to 11.9% in March from a year earlier as the tide of cheap cash pumped into the economy had a huge impact. With Money Supply growing at 35% it is hardly surprising that growth is surging, but despite the headline CPI data only showing a +2.4% increase, house prices jumped by 11.5% and the Purchasing Prices Paid index was also above 11.0%.... [more] US Retail Sales Surge 1.6% in March Thursday, 15 April, 2010 US Retail Sales Surge 1.6% in March... [more] Markets Tumble on Portugal Downgrade Thursday, 25 March, 2010 Currencies fell against the US$ across the board last night as ratings agency Fitch downgraded Portugal’s debt, the announcement tactlessly released just 24 hours before the EU summit where leaders will discuss the situation in neighboring Greece. The Euro, Pound and Yen were hit hardest, the Kiwi outperforming most but still slightly down against the US$. ... [more] Greece Parties on Debt, IMF Stuck With Bill Wednesday, 24 March, 2010 It seems some resolution has been forged ahead of the EU summit to be held on Thursday and Friday this week; the French have changed tact and are supporting Germany’s stance that the IMF should be providing support for Greece (not from Euro members as France had originally said). The decision comes after weeks of debate; the conflict has revealed EU leadership to be uncoordinated and petty, calling into question the sustainability of the joint currency. ... [more] Inflation – Making a Comeback? Tuesday, 23 March, 2010 Over the past 20 years Inflation has been exceptionally low. Driven down largely by the forces of Globalization as the cheap labour from the likes of China and India has driven down the price of goods around the world. However this period of low inflation looks like it is drawing to a close and a new period of higher inflation looks like it is returning. The likes of China and India have pumped hundreds of Billions of Dollars into their economies to protect themselves from the effects of the credit crisis. In China’s case they have increased the money supply by 35% and forced the Government owned Banks to lend out that money. This has led to an upward spiral in property prices and huge speculation in commodity markets. Yesterday India raised its interest rates to try and cool down inflation which is now at + 16.00%. Whilst China’s headline inflation rate is 2.7%, the last three months make up most of that and by mid June annual inflation will be above 8.0% and climbing.... [more] Woe for Europeans Sees Locals Up On Crosses Monday, 22 March, 2010 The Euro and the Pound were the big movers over the weekend, both made significant falls against the US$ off the back of the Greece situation and as Bank of England member Andrew Sentence warned of a “double-dip recession” suggesting interest rates will likely remain at record lows. Both the Kiwi and Aussie slipped against the US$ as well (the result of cash moving from Europe to the US) which reduces the impact on the Euro and Pound crosses; the Kiwi is sitting above 0.52 against the Euro, fresh 2-year highs, and above 0.47 against the Pound. The Pound fell over 1.5% against the US$.... [more] NZDEUR at 2 Year High Friday, 19 March, 2010 There has been a notable bid-tone around for the Kiwi recently which has seen it rise against the Pound, Euro, US$ and Aussie over the past week. The markets have brushed off the downbeat assessment of the last RBNZ announcement and are instead looking for good news at next week’s NZ 4Q GDP; the RBNZ is expecting 0.6% expansion, the market is looking for something closer to 0.8% (perhaps the cracker result the market is looking for will help lift the tone of the RBNZ). The NZ current account and Trade Balance are due to be released before month end, both of these have been improving steadily for some time and could provide further support for the Kiwi. As can be seen from today graph, the Kiwi has been largely trading with a range of 0.6850 to 0.7250 and it looks like we could head back up toward the top side of this range; this could be an opportunity for US$ importers to set Orders to top up cover.... [more] Kiwi Up on Fed Speak Thursday, 18 March, 2010 The local currencies continued to push up against the US$ overnight, encouraged by yesterday morning’s Fed interest rate meeting. The Fed said they continue to see a recovery in growth for the American economy but reiterated their expectation that interest rates will remain at “exceptionally low levels … for an extended period”. The Fed are planning to wind down their bond purchase program at the end of March and are hoping that interest rates won’t spike up without the Fed underpinning purchases. To that end, the Fed yesterday stuck to the infamous ‘low levels/extended period’ line through fear of pushing up interest rates prematurely. The prospect of highly stimulatory interest rates has encouraged investor’s appetite since yesterday morning; the Kiwi is up almost a cent to the mid 0.71’s, the Aussie pushed up almost as much to trade above US$0.92, the NZDAUD cross has recovered again to sit in the mid 0.77’s.... [more] Fed Holds; Will Debt Markets Stand Unsupported? Wednesday, 17 March, 2010 The Fed stuck to the “exceptionally low levels … for an extended period” speak at this morning’s Fed interest rate meeting, interest rates were kept on hold at 0.25%. The Fed cited a stabilizing labor market, the continuingly improving outlook for economic growth and evidence of a “significant” rise in business equipment and software as positives, but warned that “high unemployment, modest income growth, lower housing wealth, and tight credit” constrain the outlook at this stage.... [more] UK Warned By Moody’s, China Inflation Fears Tuesday, 16 March, 2010 The Pound and Euro fell against the US$ in the overnight markets as Moody’s ratings agency warned that the UK has moved “substantially” closer to losing their AAA credit rating. Rising budget deficits and high national debt servicing costs threaten the UK while opinion polls continue to point to a hung parliament at this year’s looming election, thus not providing the decisive leadership needed to make the tough budget cuts. Moody’s last night warned the US as well, although the US$ is still favored as a safe haven. The locals were slightly weaker overnight with the Kiwi drifting back to around US$0.70 and the Aussie (hit slightly harder) down half a cent to the low US$0.91’s; the NZDAUD cross is slightly firmer in the high 0.76’s. ... [more] NZ Retail Sales Monday, 15 March, 2010 Friday saw the release of retail sales data for NZ for January and the headline number was above expectations at +0.8%, however when fuel retailing was stripped out then sales were just 0.3% stronger. This put core retail sales up +1.6% on a year ago. So despite the strong tourism numbers for January, retail sales showed only a modest increase which reflects the ongoing cautiousness of consumers. With mortgage rates staying low and the average length of all mortgages now less than one year it will not be too long before consumers start to spend a bit more of their excess cash. Clearly the economy is going to keep growing, but it is going to take a while longer to feed through into the data.... [more] No Change – Bollard sees Growth “Subdued” Thursday, 11 March, 2010 The Reserve Bank left interest rates unchanged this morning as was expected. Whilst they have tweaked their growth forecasts upward slightly Dr Bollard said that growth would be subdued relative to previous recoveries. Historically the economy has expanded about 6.0% in the first year of rebound from a recession; this time around they see the growth to March 11 at 4.4%, so still a good number but a bit below previous rebounds. However, for an economy that has been flat for two years, we think 4.4% will still feel pretty good to both businesses and households.... [more] All Eyes on the NZ Reserve Bank Wednesday, 10 March, 2010 The NZ Dollar is slightly firmer against the USD and steady against the AUD ahead of tomorrow’s interest rate review by the Reserve Bank. The March MPS (Monetary Policy Statement) is shaping up as one of the key financial events for 2010. The points we will be monitoring are as follows: Growth outlook - How upbeat is the Reserve Bank about the short term growth prospects? Housing – Ironically the Reserve Bank is often obsessed with the strength in housing, but this time they may be fretting about a slowdown in housing after last years strong rebound. Government – Whilst the Reserve Bank is not meant to comment on Fiscal Policy they will no doubt make some comments about the planned changes to the tax system and depreciation deductions for investor housing that are coming up in the May budget.... [more] NZ Growth Rebound Tuesday, 9 March, 2010 The NZ Dollar has remained well supported overnight after rising sharply over the last two trading sessions. Yesterday’s gain came after news that the local Manufacturing sector had grown by 3.1% in the 4th quarter of last year, also expanding sharply was residential construction which grew by 7.4% in the period. Non-residential construction declined by 6.1% but this still left construction with a net gain of 0.7%. The Kiwi is trading around US$0.70 and around 0.77 on the NZDAUD cross. Australian business confidence is due out at 1.30 this afternoon.... [more] US Unemployment Rate holds steady at 9.7% Monday, 8 March, 2010 US Jobs data on Friday night showed that the US lost a further 36,000 jobs in February but the unemployment rate held steady at 9.7%. However the US had suffered severe snowstorms during the month which kept many businesses closed. A similar weather distorted period occurred in 1996 and the job market surged back to life in the months following the storms so the market has reacted positively to the news. Also revisions to the December and January jobs data were +35,000, neutralizing the effect of February’s declines. US shares have risen over 1.0% and short term US interest rates nudged higher helping the US Dollar regain ground vs the Japanese Yen.... [more] Who will save Greece? Friday, 5 March, 2010 Over the last month many commentators, Tuatara included, have assumed that when it got down to the wire, the strong members of the Euro zone would help bailout Greece. However, on the eve of talks between the Greek Prime Minister and the German Chancellor, it seems the Germans, the strongest of the Euro zone members, are getting cold feet. This makes us wonder; if their fellow members will not help them out, who will? ... [more] Euro Rises On Greek Deficit Cuts Thursday, 4 March, 2010 The Euro rose over 1 cent vs the US Dollar overnight after Greece announced plans to implement a further EUR 4.8 Billion of spending cuts to help reduce its deficit. The moves included higher fuel, tobacco and sales taxes. The plan will also cut bonus-salary payments to civil servants by 30 percent. Public workers already had their wages frozen and benefits cut, and Unions have called for new strikes over today’s plan.... [more] RBA Hikes to 4.00% Wednesday, 3 March, 2010 The RBA raised interest rates by a quarter-point to 4% at yesterday afternoons scheduled interest rate meeting; the RBA expects close to trend world GDP over the next 2 years, a lower than forecast peak in Australian unemployment and stable inflation pave the way for “closer to average” interest rates. The RBA again noted that lenders were quick to raise interest rates to clients, generally by about a full percent, following the previous hikes which amplify RBA tightening. A significant amount of debt in the Australian economy is short term meaning borrowers are quick to roll over into the new higher interest rate environment, quickening the impact of the RBA hikes. Aussie GDP data due out at 1.30 today is expected to show 0.9% growth in Q4 last year; this would take annual GDP to 2.4%.... [more] Pound Plummets; RBA at 4.30pm Tuesday, 2 March, 2010 The local currencies are both slightly firmer across the board ahead of today’s RBA interest rate announcement; investor confidence grew overnight as US manufacturing and personal spending measures came in slightly firmer than expected and as troubled US insurance giant AIG has managed to sell its Asian unit, raising US$35.5 billion of much needed cash. US stocks have gained and the Kiwi and Aussie are trading just shy of US$0.70 and US$0.90 respectively.... [more] NZD Rises on Trade Data Monday, 1 March, 2010 The NZ Dollar gained on Friday after the release of better than expected trade data. New Zealand recorded a trade surplus for the month of January of $269 million, well above the $100 million deficit expected. Imports remained subdued and exports buoyant, helped by the very competitive cross rate to Australia. The annualised trade position is now a very small deficit which should be reversed over the next few months as we approach the peak of the export season.... [more] NZ Business Confidence at 10-year High Friday, 26 February, 2010 Global markets kicked into ‘risk aversion’ mode late yesterday afternoon as stories circulated about credit agencies knocking back Greece’s rating possibly two notches before the end of March. With the Euro back testing last week’s low the Aussie and Kiwi came under pressure against the US$ as well; the Kiwi sits just under US$0.6900 and the Aussie is around US$0.8850. The NZDAUD cross is slightly higher at just under 0. N7800, guided up by yesterdays very positive NZ business confidence numbers. Overnight data showed that initial jobless claims were worse than expected (although the measure is still pointing to a fall in the headline US unemployment rate later this year), causing US stocks to give up yesterdays gain and more to trade down around 1.5% this morning. UK and US GDP are both due to be released overnight... [more] Bernanke Comments Calm Market Thursday, 25 February, 2010 After Tuesday nights sharp drop in many currencies and share indices the markets recovered some lost ground after soothing comments from Fed Chairman Ben Bernanke. He reiterated the Fed’s current line of keeping interest rates low for an extended period saying the economy was in the early stages of recovery. Reinforcing his comments was news that sales of New Homes in the USA declined in January.... [more] Currencies Fall on sharp drop in US Consumer Confidence Wednesday, 24 February, 2010 US Consumer Confidence dropped sharply in February to 46 from 56.5 in January. Expectations had been for a slight decline, it seems the persistently poor prospects in the US Job market are weighing on consumers outlooks. The bad weather that has recently hit the USA has also had a negative impact on people’s optimism. However the Obama-led Democratic Government is close to passing a USD15.0 billion jobs bill to help boost employment.... [more] Low NZDAUD Boosts NZ Tourism Tuesday, 23 February, 2010 A quiet night in the world’s financial markets with most currencies and stock indices ending broadly unchanged; the Kiwi is holding in around the 0.7000 level vs the USD and around the 0.7800 level vs the AUD.... [more] Currency Markets Steady After Fed Monday, 22 February, 2010 Currency markets steadied after a somewhat turbulent week last week most currencies regaining some ground vs the US Dollar; the Euro rebounded just over 1 cent vs the USD after first tumbling after news that the US Federal reserve would raise the discount rate to 0.75% from its previous 0.50%. The move signals the US Central Banks trend back toward more normal financial market conditions, however, despite the fact that it makes it more expensive to borrow US Dollars for the speculative community, the Central went on the record saying the move did not mean the start of a tightening cycle.... [more] US Looking Like Best Bet Friday, 19 February, 2010 The US$ continues to be the favorite; last night the Euro remained soft as the market tries to make sense of the Greek Swap mess (and wondered who, other than Greece, may be using swap positions to help balance their fiscal positions) and the GBP continued to struggle under the weight of its Government deficit. The Kiwi and Aussie dollars were unable to advance and are trading around yesterdays levels at just above US$0.70 and US$0.90 respectively. Rumors swirled that the Swiss central bank had intervened in the currency market (again), selling Swiss Frank to help keep the currency competitive against the Euro. ... [more] A Trend of Positives For the US, Euro Tumbles Again. Thursday, 18 February, 2010 Another round of positive data for the US last night; housing starts exceeded expectations, building permits data was a touch firmer than anticipated, industrial production showed further growth and capacity utilization increased. Stock markets rose overnight encouraged by the data, as well as some positive earnings announcements. Factory production rose by 0.9% in January as manufacturers pumped out more consumable goods, this follows a 0.7% increase in December. As can be seen from today’s graph of US capacity utilization, US production looks to have definitively turned a corner (though admittedly recovering from a low base) which points to continued growth in America.... [more] NZD Back Above 0.7000 Wednesday, 17 February, 2010 Financial markets rallied around the world last night as better earnings from Barclays Bank in the UK and a pick up US manufacturing put markets back on a pro-growth bias. The anxiety over Greece has been pushed to the background as Greece pledged to do more curb its Governments deficit. This has seen the NZD back above 0.7000 vs the USD and remaining steady in the mid to low .7800 area vs the AUD.... [more] Is China Getting Ready to Revalue its Currency? Tuesday, 16 February, 2010 Currency markets were little changed overnight with the US markets closed. The Euro remained under pressure as European Authorities instructed Greece to make more budget cuts. How this will help the Greek economy is hard to see, as they are already in recession, but the European Authorities seem reluctant to make a new credit facility available to Greece which would resolve its present funding pressures.... [more] NZD Soft as Kiwis Close Wallets Monday, 15 February, 2010 The Greek debt crisis continued to cast a shadow over the markets on Friday night causing the Euro to dip to a fresh 9-month low against the US$, suppressing appetite for US stocks and slowing the ascent of the locals against the US$. The Kiwi stopped short of 0.70 to the US$ (although disappointing NZ retail sales data released on Friday morning went someway to help this) and the Aussie has pulled back to just under US$0.89, slightly off the peak hit shortly after last Thursdays surprisingly strong Aussie unemployment data.... [more] Locals Up on Aussie Unemployment, Euro Struggles Friday, 12 February, 2010 he global rebound in stocks, commodities and local currencies vs. USD continued last night, helped by US initial jobless claims falling by 43k this week and yesterdays better than expected Aussie unemployment. America is looking good for 2010 with Q4 GDP coming in well above expectations at 5.7% and unemployment making a surprise decline to 9.7%, last night’s better than expected decline in initial jobless claims is another step in the right direction. ... [more] Bernanke Says US Rates to Rise “Before Long” Thursday, 11 February, 2010 Ben Bernanke the head of the US Federal Reserve said they would raise the discount rate at which the Central Bank lends to the US Banks before long. Bernanke was speaking to the US House of Representatives Finance and Banking Committee (NB Alan Bollard does the same thing in New Zealand). The Discount Rate is the rate used when banks borrow from the Central Bank. By raising this first it has the effect of making less money available to the banking system. The idea is that by raising the Discount Rate rather than the Fed Funds rate they can see how the banking sector reacts without affecting the broader economy. It is like testing the waters to see if the economy is ready for higher interest rates.... [more] Euro Rises 2 cents on Support for Greece Wednesday, 10 February, 2010 The Euro rebounded by nearly 2 cents on news that the EU Finance Ministers will meet Thursday night to look at ways of supporting Greece in its current financing squeeze. Yields on Greek debt fell by about 0.50% in a clear sign that the markets thinks support will be provided. Jean Claude Trichet, head of the European Central Bank, flew home early from Sydney to attend the meeting. The EU is looking to provide support to Greece in the “widest” sense possible. Just exactly what form the support will take is unclear, but for now the markets have taken the news as a positive sign.... [more] Markets Quiet Overnight, NZ waits on Key Speech Tuesday, 9 February, 2010 Financial markets were quiet overnight with the NZD little changed from last yesterday starting today around .6860 vs the USD and just above .7900 vs the AUD.... [more] Markets Steady After US Unemployment Falls Monday, 8 February, 2010 Financial markets stabilised late Friday night after news that the US unemployment rate has dropped from 10.0% to 9.7%. The size if the workforce increased in January which means the unemployment rate was able to drop despite a net 20k of jobs being lost. With US GDP growing at an annualised rate of 5.7% in Q4 last year, the unemployment rate is expected to improve further. In the currency markets, the NZD has recovered some ground vs the USD to start the week just under 0.6900. Against the AUD the kiwi begins at 0.7950.... [more] Big Moves in Markets, NZD Falls 2 cents Friday, 5 February, 2010 In the first sign of real volatility this year currencies fell sharply vs the US Dollar causing commodities to tumble and global sharemarkets to plunge. In the last few months markets had resumed a more normal mode of trading, however last nights dramatic moves echoed back twelve months to a period when the markets were in panic mode. The panic was triggered from a rise in the number of people applying for the unemployment benefit in the US, a dark bellwether for tonight’s all-important US unemployment numbers.... [more] Kiwi Eases Back; NZ Unemployment at 10:45 Thursday, 4 February, 2010 A quiet night last night but a busy week ahead with Aussie retail sales and building approvals, UK and Euro-zone interest rate announcements and NZ and US unemployment data still to come. In the markets, the local currencies, commodities, and stocks all edged back against the US$, tempering the rises made earlier in the week. The Kiwi has slipped back under 0.71 against the US$ and back towards 0.80 on the NZDAUD cross. The next key event for the Kiwi is NZ unemployment data at 10.45 this morning; expectations are that unemployment increased to 6.8% in Q4, the current rate is 6.5%. With employment intentions rising in New Zealand and with early indicators such as consumer and business confidence firmly rebounded from the 08/09 slump, it could be that unemployment is about at the peak in New Zealand.... [more] NZDAUD Leaps as RBA Leaves Rates Unchanged Wednesday, 3 February, 2010 In a surprise move the Reserve Bank of Australia left Aussie interest rates unchanged at 3.75% yesterday causing the NZDAUD cross to rise another cent to be above .8000 this morning. The RBA cited the fact that the Australian Banks had lifted mortgage rates by 1.0% last year when the Central Bank had raised the cash rate just 0.75% as the main reason for sitting tight. Essentially, the market had done the extra tightening for them. As a result they want to wait and see how the economic data evolves with effectively 4 hikes in the marketplace. As most mortgages in Australia are on floating rates there is an immediate pass through to households. Yesterday saw Aussie business confidence fall to its lowest level in six months as the previous hikes weigh on the economy.... [more] US Growth Rebounds, Euro Struggles Tuesday, 2 February, 2010 US Economic growth surged back into positive territory in the 4th quarter of 2009 growing by 5.7%, well above expectations of a 4.6% growth rate. The rebound was reinforced overnight when the Institute for Supply Management factory index for January rose to its highest level since August 2004. This surge in manufacturing activity should help underpin the economic recovery in the USA and in time see the unemployment rate start to decline.... [more] Euro Slides On Greece Friday, 29 January, 2010 The Kiwi continues to sit just above the 0.7050 level against the US$, yesterday’s ho-hum RBNZ interest rate announcement has done little to move the market. Concerns over Greece’s ability to pay back debt continues to dominate the overnight headlines, the yield on Greek bonds is currently trading 4% above those of Germany (the Greek 10-year yielding 7.10%) and fingers are being pointed at Portugal and Spain whose investors are worried might fall into the same category. ... [more] NZ Reserve Bank – “Removing Policy Stimulus by mid 2010” Thursday, 28 January, 2010 The NZ Reserve Bank has left interest rates unchanged at 2.50% with little change in their wording from December. We wonder if they are waiting to see what happens in the budget in May before deciding on rates. However, given the limited action from the National Government this seems a faint hope. We also anticipate stronger economic data over the next few months, so if the RBNZ were disappointed by the Budget then they may need to hike even more aggressively. We still favour a 0.25% rise on April 29 driven by stronger economic data between now and then.... [more] NZD Falls as China stops lending Wednesday, 27 January, 2010 The NZD was lower overnight after news reports that Chinese Banks have stopped making new loans. This lending halt comes after moves by the Chinese Central Bank to raise the Reserve requirements that Banks must hold with the Central Bank. This has the effect of reducing the amount of cash available that Chinese Banks can lend out.... [more] NZDAUD Outlook Tuesday, 26 January, 2010 There was little movement in the overnight markets with US shares regaining some ground after last weeks sell-off. This small rebound was despite US home sales being dropping by -16.5% vs the -9.0% expected. Two days out from the NZ Reserve Banks next OCR review and the NZDAUD cross has slipped back, as has been the pattern ahead of such reviews over the past six months. The markets think that with the RBA already tightening, and with the RBNZ reviews invariably pointing to a further delay in hikes for New Zealand, the gap in the relative cash rates looks set to increase; if the RBA raise again next week (taking the Aussie OCR to 4.0%) they will have a 1.50% advantage over the NZ cash rate. ... [more] This is not 2009 Monday, 25 January, 2010 Financial markets got the strongest reminder yet that 2010 will be a lot different to 2009 on Friday night as US equity markets lost another 2.0% in value and look like they will lose more ground this week. (see graph below) 2009 was characterized by rising markets, across all sectors, fuelled by endless amounts of cheap cash as Central Banks globally printed money as fast as they could to pull the world back from the brink of another “Great Depression”. Clearly their efforts were successful as equity market rose sharply, as did other risk assets like the NZD and AUD. However as 2010 gets underway those same Central Banks want to wind back the cheap easy money, as seen by China’s moves over the last few weeks. ... [more] Obama to Shrink Banks, China Running Hot, Kiwi Down Again. Friday, 22 January, 2010 Stocks in the US tumbled again overnight, this time driven by a speech from President Obama aiming to impose restrictions on the scope and size of proprietary trading operations of financial institutions. Further restrictions would act to limit the actual size of Banks increasing competition and leaving no single bank ‘too big to fail’.... [more] China Tightens, Earnings Soft; Kiwi Falls 2 Cents. Thursday, 21 January, 2010 A major drop for virtually everything against the US$ in the last 24 hours; since pushing to a high of US$0.74 before the NZ CPI announcement yesterday morning, the Kiwi has lost as much as 2 cents to the US$ and currently sits just under 0.72 this morning. The movement out of risky assets comes as China yesterday announced plans that it will restrict the amount of new bank loans to US$1.1 trillion this year (down from the US$1.37 trillion lent in 2009), and as some softer than expected US earning announcements doused hopes that signs of a recovery will kick equities higher.... [more] Pound Up, Euro Down; NZ CPI at 10.45 Wednesday, 20 January, 2010 The Pound was the big winner and the Euro was the big loser overnight; the Euro slumped a full percentage point against the US dollar as it continues to be shunned while the Greece situation plays out, the ZEW German investor confidence survey also helped fuel the arguments against the Euro after it showed a decline from 50.4 to 47.2, markets were expecting 50. The local currencies were initially dragged down as a sagging Euro pushed up the US$ but they have since rebounded after a 1% jump in US stock markets encouraged risk appetite (US stocks are up on speculation Obama’s Healthcare bill will fail which would remove a large regulatory and financial cost on the industry). At 10.45 this morning NZ CPI data for Q4 is released; the market is expecting 2.1% annual, the RBNZ was expecting 2.0 at the December meeting. Inflation has been particularly sticky in New Zealand, even as GDP contracted. The RBNZ’s next interest rate meeting is next Thursday.... [more] Euro Struggling; Decline in NZ Home Prices. Tuesday, 19 January, 2010 It was a relatively quiet session overnight with the American markets closed for Martin Luther King Day; the locals ground mildly higher throughout the session along with similar small rises in Asian and European equities. Oil managed to close a touch higher breaking a 6-day losing streak.... [more] Greece Causes Risk Wobble, Euro Drops. Monday, 18 January, 2010 Classic risk aversion moves over Friday night; the local currencies, Euro and Pound are all down against the US$ and Yen. US and European stock markets have declined by more than a percent each, oil shed a dollar to US$78 and US interest rates dropped as cash flows from risky assets toward the safety of US government debt. The Kiwi is down about half a cent against the US$ and currently sits under US$0.74, the Aussies fall was a little steeper which sees the NZDAUD cross up slightly from Friday.... [more] Aussie Stronger on Drop In Unemployment Friday, 15 January, 2010 he locals are up against a softer US$ this morning after receiving a boost from yesterdays positive Aussie unemployment data (story below). The Pound continued to climb following on from yesterdays postulations from a Bank of England voting member Andrew Sentence who seemed open to the idea of raising interest rates on signs of recovery. The greenback was down after a surprise decrease in retail activity in December. Retailing contracted 0.3% against expectations of a 0.5% increase, underscoring concerns that consumers will continue to struggle even as financial markets push on. ... [more] Pound Climbs; Aussie Unemployment at 1.30 pm Thursday, 14 January, 2010 A relatively tight range for the currency markets last night with the Kiwi gyrating around US$0.74, the Aussie finished with slightly more strength against the greenback (currently sitting just above US$0.92) although it is no higher than what we have seen earlier this week. It has been a while since we have been able to say this but the Pound was the biggest winner overnight, it is up around half a percent against the US$ and has pushed the NZDGBP cross down about half a cent to the mid 0.45’s. The Pound rose after the Bank of England voting member Andrew Sentance was cited by The Guardian news paper as saying that the BoE will have to consider raising rates on signs of improvement.... [more] China Tightens Bank Belts, Alcoa Weighs on Stocks Wednesday, 13 January, 2010 Some disappointing earnings from Aluminium giant Alcoa and news that the Chinese government has taken further steps to curb rapid loan growth steered the market away from risky assets last night; the Kiwi pulled back under US$0.74, the Aussie fell harder to US$0.92 (helped by poor housing finance data released yesterday, see below) which leaves the NZDAUD cross back up above 0.8000... [more] All Up on US$ Weakness Tuesday, 12 January, 2010 It was a night of US dollar weakness with the Euro leading the charge and the locals pushing up about half a cent a piece. The Kiwi broke through US$0.74, the Aussie touched US$0.93 and the NZDAUD cross ground back up to sit around 0.80 this morning. Interestingly stocks and US$ denominated commodities showed small declines suggesting the flows out of US$ and into Euro, Kiwi and Aussie were not ‘risk appetite’ driven.... [more] US Unemployment Steady at 10.0% Monday, 11 January, 2010 Non-farm payrolls showed that -85k jobs were lost in December, less than the no change expected. The November data was revised from -11k to +4k, the first monthly increase in job numbers since December 2007, the unemployment rate was kept constant at 10.00%. The US$ weakened and shorter term interest rates declined following the announcement as the markets expect US interest rates remain unchanged for “an extended period” (the Feds pledge). This sees the Kiwi, Aussie and other majors’ rise against the US$; the Kiwi sits in the mid to high US$0.73’s this morning. The Aussie, buoyed by positive comments from Aussie Treasurer Wayne Swan over the weekend, slightly outperformed the Kiwi which saw the NZDAUD cross nudge back under the 0.80 mark over Friday night. ... [more] NZ Trade Bal Beats Expectations; Non-farms Tonight. Friday, 8 January, 2010 It has been a busy 24 hours with NZ and Aussie trade data, Aussie retail sales, the Bank of England interest rate announcement and a slight tightening of interest rates by the Chinese. Firstly, in the markets; the Kiwi and Aussie both eased back against the Greenback after initially climbing throughout the local session yesterday; both are back trading near yesterday morning’s levels ahead of tonight’s non-farms release. Oil has had its first down day after a 10-day rising streak (its longest consecutive climb since 1996) and US stocks are flat. The big mover overnight was the Chinese stock market which fell nearly 2% after the Chinese Central Bank issued 3-month bonds with a slightly higher yield indicating they are moving to tighten liquidity and curb record lending. ... [more] Locals Up as Fed Remains Supportive Thursday, 7 January, 2010 The Kiwi was up slightly to the mid-to high 0.73’s in overnight trading, the Aussie climbed nearly a cent against the US$ to break US$0.92 and the NZDAUD cross has fallen back around half a cent to just over 0.80 this morning. Fed minutes released at 8:00am this morning showed no clear expectations for the stability of the recovery or of inflationary pressures, the committee agreed that policy will have to remain responsive to the changing situation in the US and additional stimulus (asset purchases)cannot be ruled out should the situation deteriorate. The mention of additional stimulus weighed on US interest rates and the US$ following the announcement, helping push up all the US$ pairs, including the locals.... [more] Shock Drop in US Home Sales Wednesday, 6 January, 2010 A change of heart for the markets last night; after early attempts for the US$ to continue grinding lower, a shock drop in the sales of US existing homes drove cash back into US$. The Euro has fallen over a cent to the US dollar, as has the Pound, though the locals have fallen from the failed highs to end up at yesterday’s levels. The Kiwi hovers in the mid-to-low US$0.73’s, the Aussie just a touch above US$0.91 and the NZDAUD cross is at similar levels.... [more] Kiwi Jumps on Soft US$ Tuesday, 5 January, 2010 A bout of US$ weakness over year end has seen all the majors rise against it; the Kiwi is up a full cent to 0.7335, the Aussie is up over a cent to 0.9125, the Euro is up over a cent to 1.4425. US equity markets were open overnight and they have enjoyed a boost as well, indexes are currently up over 1.5% and a lower US$ has seen oil and gold jump. Oil pushed up over US$1.50 to US$81.30, equaling the 2009 high set in October. With very light trading in the locals with NZ and Australia being on holiday yesterday and with commodities performing well, the Kiwi and Aussie have outperformed on the crosses. ... [more] Quiet Close to 2009! Thursday, 31 December, 2009 A slower night last night in the currency markets as the last of this weeks US debt issue got away without much difficulty. Commodities, US stocks and the local currencies were all slightly softer against the US$ although the Kiwi still remains above pre-holiday levels against the US$, Aussie, Euro, Yen and Pound. It has been the light trading leaving the Kiwi at the whim of the price action rather than any fundamental change in the Kiwi that has caused the rise. ... [more] Softer US$ Sees Locals Jump Wednesday, 30 December, 2009 A jump for the local currencies vs. the US$ last night; the Kiwi is up over a cent to touch as high as 0.72 and the Aussie pushed up into the high 0.89’s – the NZDAUD cross is roughly unchanged. Part of this weeks US$118 billion in new debt being issued from the US Treasury was able to be auctioned off last night without pushing up interest rates; this saw less attraction for US$ across the board, and given the light trading, the local currencies were easily pushed up. The kiwi benefited by strengthening against all the majors. ... [more] Kiwi Flat ahead of US Debt Auction Tuesday, 29 December, 2009 It has been a quiet holiday period so far; the Kiwi sits in the mid 0.70’s to the US$ and around 0.80 to the Aussie, much where it traded coming into the break last week. Holiday periods are typified by low liquidity and flat markets although unexpected (or ‘fat tail’) events can often have an exaggerated impact on the market that is unable to absorb the shock. ... [more] Kiwi Pushing Lower; Tuatara Office Hours Thursday, 24 December, 2009 The Kiwi pulled back some ground over night to around 0.7050 after pushing down into the high 0.69’s after yesterday morning’s disappointing local GDP data (another fresh low since September). Q3 GDP expanded at 0.2% rather than the 0.4% expected, this takes annual GDP to -1.3% (-1.2 expected). The Kiwi weakened against the Aussie following the announcement but has ground back into the 0.80’s overnight. Despite the move up for the NZDUSD last night the gradual process of Kiwi weakening still looks intact. ... [more] US$ Up Again; NZ GDP at 10.45 Wednesday, 23 December, 2009 Plenty of US data last night; GDP disappointed, a manufacturing survey had good and not so good bits and US housing data beat expectations. In the markets the recent tend toward a US recovery continued to dominate direction; stocks are up around half a percent, US bond yields continued to rise and the US$ was again in vogue. NZ Q3 GDP will be released at 10.45 this morning; expectations are for an expansion of 0.4% QoQ which would lift annual GDP from -2.1% to -1.2%. Leading indicators (like consumer confidence and house sales) are pointing to a recovery in NZ GDP over the next few quarters (see graph).... [more] Markets Favor the US Tuesday, 22 December, 2009 Optimism for the US economy drove the moves last night; money flowed out of US government bonds and into stocks ahead of tonight’s US GDP announcement. Equity markets are currently up over 1%. The local currencies were pushed lower as investors favored US$ assets; the Kiwi is currently trading under US$0.71, the Aussie fell slightly more to US$0.88 which sees the NZDAUD cross up slightly to just over 0.80. As long as the recovery continues in America we would expect to see more and more pressure pushing up US interest rates, reducing the comparative attractiveness of locally denominated assets and weighing on the local currencies. ... [more] US, UK and NZ GDP this week Monday, 21 December, 2009 Markets consolidated on Friday night after what was a busy week. The US$ hung around the recent highs as the Euro gave up attempts at another push lower. The Kiwi failed to hold below US$0.71, the Aussie managed to climb back from Fridays low to sit at 0.89 which leaves the NZDAUD cross steady just below 0.80. ... [more] US$ Up; Risk Unwind Rolls On Friday, 18 December, 2009 The Euro fell nearly 2 cents (1.5%) to just over 1.43 since yesterdays mornings FED announcement as concerns over the cut in Greece’s credit rating weighs on the Euro and drives safe haven buying of US dollars. The locals were also pushed down against a stronger US$; the Kiwi lost a cent late yesterday to trade around US$0.71 this morning, the Aussie fell just over a cent to trade at US$0.8850 – its lowest since early October. ... [more] FED: Exceptionally Low for Extended Period Thursday, 17 December, 2009 At this mornings scheduled interest rate meeting the US Fed remained committed to keeping rates “exceptionally low” for an “extended period” although did recognize that the economy is strengthening in the form of increasing economic activity, more stable financial markets, improvements in the housing sector and, the most significant change, pressure in the labour market is “abating”. Given the improving outlook the Fed said they expect the special liquidity facilities implemented during the depths of the crisis too expire on Feb 1 2010, as planned. The reaction in the markets has been muted; stocks are holding onto the 0.50% gained pre-announcement, the Kiwi is steady around 0.72, the Aussie is steady around 0.90 although the Euro has dropped about a quarter-cent against the US$.... [more] What Will The Fed Say? Wednesday, 16 December, 2009 The US$ was again stronger in anticipation of tomorrow mornings Fed interest rate meeting (8.15am NZ time); the Kiwi is down over half a cent to 0.7200, the Aussie fell almost a whole cent to US$0.9050, this has seen the NZDAUD up slightly to 0.7950 ahead of today’s Aussie GDP data (see below). The US Dollar Index has rebounded to its highest level since October. ... [more] Dubai Gets Bailout; Stocks, Kiwi Up Tuesday, 15 December, 2009 Stocks are up and the US$ is down overnight as Abu Dhabi agreed to provide US$10 billion to Dubai World to cover the debt of troubled property subsidiary Nakheel. Concerns were that Nakheel, whose bond matured yesterday, would default on the debt causing a domino of defaults and bankruptcies for banks and other large companies in the area, and would cause losses for the US and European banks that have exposure to the Middle East. The US Stock Indexes would have been up higher had Exxon Mobil not lost 4% following announcements to acquire XTO, America’s largest natural gas producer, and had Citigroup not fallen 5.6% following the announcement of plans to raise part of the US$20 billion needed to pay back the TARP funds by issuing new shares and debt. ... [more] Good News for States; US$ Rebounds Monday, 14 December, 2009 More good news from the US over Friday night as consumer confidence and retail sales both beat expectations; retails activity expanded by 1.3% in November (1.2% not including Auto sales, expectations were for a 0.6% gain), and the Michigan consumer confidence Index rose to 73.4 against a forecast 68.8. In response, the market has ratcheted up US interest rates which in turn has driven up the US$. If the US can keep producing evidence of final demand like it has over the past couple of weeks then the rise in the US$ looks set to continue - the Fed interest rate meeting on Thursday morning is the next big hurdle for further gains. In other news, eyes will fall on the Middle East to night to see is Nakheel, the troubled property subsidiary of Dubai World, will fail to return the US$3.52 billion principal of the bond maturing today.... [more] RBNZ Puts Kiwi Up Across Board Friday, 11 December, 2009 The Kiwi was the clear favorite across the board after yesterday morning’s RBNZ interest rate announcement; the Kiwi made gains of 1% against the Aussie and over 1.5% against the US Dollar, Euro and Pound (currently at 0.7280, 0.4950 and 0.4480 respectively). The boost comes as yesterdays RBNZ interest rate announcement shows a move hike interest rates “around the middle of 2010” as opposed to Octobers forecast of hikes in the “second half of 2010”. Elsewhere, the Bank of England interest rate meeting made no splash; rates were held at 0.50%, the bond purchase program was kept steady at GBP200 billion – the BoE are playing wait-and-see. In the US, stocks were up as a better than expected trade balance boosted sentiment and in Australia, the unemployment rate unexpectedly dropped to 0.1% to 5.7% yesterday afternoon. Aussie added 31.2k jobs in November (against expectations of 5k), 30.8k of those jobs were full time – a very strong result.... [more] RBNZ Holds, Hints at Hikes Mid-2010, Sees GDP at 4% Thursday, 10 December, 2009 The RBNZ left rates on hold at 2.50% at this morning’s meeting and said that “if the economy continues to recover, conditions may support beginning to remove monetary stimulus around the middle of 2010”. The RBNZ says they remain cautious that the recovery in our trading partners and still pronounces itself reluctant to tighten until this growth stabilizes, although the have again wound up expectations for our own GDP outlook which the RBNZ now expects to reach 4% by late 2010 (see graph).... [more] NZDUSD Set to Close Under 0.71; RBNZ Preview Wednesday, 9 December, 2009 Markets were generally softer overnight, building on the idea that higher interest rates in the US will put an end to cheap funding for long-risk positions. News of a US$3.65 billion loss for Dubai World’s property subsidiary Nakheel and worse than expected industrial production from Germany did not help sentiment either. US Stocks are down 1%, gold fell US$20 to US$1,138 per oz (now down 7.5% from Friday) and oil hit a 2-month low at US$72.80 (down from recent highs at US$81).... [more] Bernanke Not Swayed By Unemployment Data Tuesday, 8 December, 2009 The currency markets continue to bear the weight of Friday night’s surprise drop in unemployment; the Kiwi, the Aussie, the Euro and the Pound all remained under pressure against the US dollar as the chance of increasing US interest rates make the drop in the US$ less of a one way bet. Each of the currencies continued to trade over half a cent lower during the European day although comments from Fed Chairman Ben Bernanke this morning saying that the US economy still faces “formidable headwinds” has caused them to correct back up early this morning. The Kiwi has pushed back to the mid-0.71’s, the Aussie is back in the mid 0.91’s and the NZDAUD cross steady under 0.7850. If the Kiwi can close a day this week under 0.71 then we would expect the move down to continue.... [more] US Unemployment Rate Drops; Kiwi Down Monday, 7 December, 2009 Some good news from the non-farm payrolls data on Friday night; the US unemployment rate actually declined by 0.2% to 10%. Only 11k jobs were lost in November, much lower than the -125k expected - this is the smallest loss of jobs in America since December 2007. Forecasts would have kept the unemployment rate steady at 10.2%. In the markets; the US$ strengthened following the news which has in turn seen the local currencies fall, US stocks rallied strongly at first then eased back to close up just half a percent and US interest rates have jumped up. We have been expecting some sort of recovery in the US employment market given that leading indicators such as new claims have been pointing to a rebound (see graph). ... [more] Markets Steady before US Unemployment Friday, 4 December, 2009 A dot day for the US share market last night; an early attempt to push the rally on was halted at the release of the Institute of Supply Management (ISM) manufacturing survey. The survey showed the US service economy contracted in October, although worker productivity was up for the same period and initial jobless claims were 23k less than expected at 457k for last week which is a positive sign before the US non-farm payrolls and unemployment data is released this evening. A lot hinges on unemployment these days; Federal Reserve Chairman Ben Bernanke appeared before the Senate last night and said the Fed are “committed to implementing our exit strategy in a manner that both supports job creation and fosters continued price stability”.... [more] Focus Falls to US Unemployment Thursday, 3 December, 2009 Markets eased back overnight as a slightly worse than expected result from the US ADP unemployment survey was enough to keep the risk buyers at bay. Also, concerns that new legislative changes to the way derivatives are traded in the US will impact bank profits saw Financials among the biggest fallers overnight; some big name banks slid as much as 2%. US stocks are down around 0.25% and the Kiwi is down half a cent from yesterday afternoon. The Aussie dollar had more staying power overnight, it is largely unchanged this morning around US$0.9250 which has seen the weaker Kiwi slip back into the low 0.78’s on the NZDAUD cross. Lending support to the Aussie dollar was the price of Gold which pushed on to yet another record high at US$1,213 per oz. On the local scene, today sees the release of Aussie retail sales at 1.30 pm followed by New Zealand’s ANZ commodity price index at 3.00 pm... [more] Focus Falls to US Unemployment Thursday, 3 December, 2009 Markets eased back overnight as a slightly worse than expected result from the US ADP unemployment survey was enough to keep the risk buyers at bay. Also, concerns that new legislative changes to the way derivatives are traded in the US will impact bank profits saw Financials among the biggest fallers overnight; some big name banks slid as much as 2%. US stocks are down around 0.25% and the Kiwi is down half a cent from yesterday afternoon. The Aussie dollar had more staying power overnight, it is largely unchanged this morning around US$0.9250 which has seen the weaker Kiwi slip back into the low 0.78’s on the NZDAUD cross. Lending support to the Aussie dollar was the price of Gold which pushed on to yet another record high at US$1,213 per oz. On the local scene, today sees the release of Aussie retail sales at 1.30 pm followed by New Zealand’s ANZ commodity price index at 3.00 pm... [more] Markets Move Higher; RBA on Hold Wednesday, 2 December, 2009 Plenty of action for the currency markets to digest over the last 18 hours; the RBA raised interest rates by a quarter-point to 3.75% and signaled they will now hold, the Bank of Japan spooked the market by announcing an emergency meeting last night only to deliver a disappointingly small new loan facility, the Dubai World debt situation for now looks to be contained which sees the market breath a very tentative sign of relief and in the US, the ISM manufacturing survey continues to point the way toward recovery. The market reaction - global equity markets stole back more of the ground lost following the Dubai-led sell off late last week; US stocks are up about 1.5% at present. The US dollar was weaker right across the board which allowed the Kiwi and Aussie to add just over a cent each.... [more] Doubts About Dubai Linger; RBA at 4.30pm Tuesday, 1 December, 2009 After a highly tumultuous couple of trading days the markets seem unsure which way to turn; the Dubai story was a timely reminder that some of these financial black holes still exist, highlighting the risk that financial markets are overpricing the world returning to normal. While some major names in the US, and particularly in Europe, have loans to Dubai World, none of these banks see the size of the loan as significant enough to warrant major concern of default. It appears that the default will be isolated to Dubai and not trigger a run of similar breakdowns in other markets – although that’s what everyone thought last year when Bear Sterns got bailed out only to have Lehman Bros go bust soon after and trigger the biggest financial meltdown since the 1930’s.... [more] Dubai Triggers Kiwi Freefall Monday, 30 November, 2009 The Kiwi went into freefall on Friday as news that Dubai World requested a debt restructuring caused havoc in the credit default swaps markets and caused brutal losses to European stocks; this is the starkest reminder yet that the underlying issues of the credit crisis will take a long time to go away. Whilst the United Arab Emirates were always at risk of having to support the exorbitantly levered property developer, it seems the scale of the debt has reminded the markets how careless a lot of lending was pre-credit crisis. At USD 60.0 Billion it seems a vast amount to have lent to one entity in a small Emirate that ironically does not have any oil.... [more] Dubai Freaks Market; Kiwi Hit Friday, 27 November, 2009 Global equity markets, commodity markets and local currencies have had a harrowing 18 hours after news emerged yesterday that the highly leveraged Dubai World, a government investment company probably best known for some of the more obtuse island-based developments that stretch into the ocean near Dubai, has attempted to reschedule its debt.... [more] First Signs of Recovery for US Economy Thursday, 26 November, 2009 The data printed in the US last night continues to point the way toward recovery; personal spending and personal income measures both grew at a faster than expected rate in October, initial jobless claims came in under expectations at 466k (its lowest increase since October 2008), the sale of new homes jumped 6.2% from September to October (vs expectation of just 0.4%!) and the University of Michigan confidence survey came in above forecast at 67.4. Initial jobless claims are a good leading indicator of unemployment and the move below 500,000 claims could potentially signal the peak in unemployment is not far away. Once unemployment peaks and starts to decline it will only be a matter of months before the market and the Fed look towards higher short term US interest rates.... [more] China Stocks Down 3.5%, Kiwi Pushes Lower Wednesday, 25 November, 2009 So much for Mondays rally; equities were down across Asia, Europe and the US last night, oil came off a further few dollars and local currencies came under the hammer as well. The big mover in the market in the last 24 hours has been the Shanghai Index which is down 3.5% after the market baulked at the idea Chinese banks may have to raise more capital.... [more] Is the US on the road to recovery? Tuesday, 24 November, 2009 A bit of a bounce for the Kiwi dollar overnight after spending the end of last week heavily on the back foot; the Kiwi has rebounded about half a cent to sit just over 0.73 against the US$ but the rally was matched by the AUDUSD – as a result, the NZDAUD sits just fractionally higher, although still in the low 0.79’s. The gains in the Kiwi were actually quite mild given the gains in other markets; European equities started the week with a 2% rally while US markets are currently up over 1% -the US market was up nearly 2% shortly after the open but is gradually floating back down. Oil rallied over 2% at one stage but the moves proved unsustainable in this market as well and prices have retreated back to the trade below the open. The conclusion; markets remain fickle.... [more] Kiwi Down as Investors Rather 0.005% on USD Cash Monday, 23 November, 2009 The pressure on the Kiwi continued over Friday night as some classic risk aversion in the US saw investors wind back the long risk trades. The US$ index is up, US Stocks are down and yield on short term US government debt fell as investors clambered to the safety of bonds – the yield on 3 month government bill rates dove to nearly zero on Friday night (not hit since the height of the credit crisis last year), 2 year bond rates pushed as low as 0.67% although recovered later in the session. Investors remain skeptical about how much life is left in the monster rally of ‘09 and haven’t needed much of an excuse to scale down bets this past week. ... [more] Kiwi Down as Investors Rather 0.005% on USD Cash Monday, 23 November, 2009 The pressure on the Kiwi continued over Friday night as some classic risk aversion in the US saw investors wind back the long risk trades. The US$ index is up, US Stocks are down and yield on short term US government debt fell as investors clambered to the safety of bonds – the yield on 3 month government bill rates dove to nearly zero on Friday night (not hit since the height of the credit crisis last year), 2 year bond rates pushed as low as 0.67% although recovered later in the session. Investors remain skeptical about how much life is left in the monster rally of ‘09 and haven’t needed much of an excuse to scale down bets this past week. ... [more] Local Currencies Take Big Hit Friday, 20 November, 2009 The local currencies have taken a big hit overnight; the NZD has dropped 1.5 cents to US$0.73 and the Aussie is down almost a similar amount to under US$0.92. On the crosses, the Kiwi has come under just as much pressure; the NZDGBP is down half a cent to 0.44, the NZDEUR is down a 1 cent from this week’s high of 0.50 to trade at 0.49 this morning and the NZDJPY has dived almost 2 cents (almost 3%) to 64.80. The NZDAUD has slipped about half a cent to the mid 0.79’s this morning.... [more] Bank of England Split 3 Ways Thursday, 19 November, 2009 The minutes from the Bank of England interest rate meeting released last night show that UK policy makers were split 3 ways when making their decision to extend the bond purchase program at the last meeting. The bond purchase program was extended by GBP25 billion to a total of GBP200 billion. The BoE had to weigh up concerns over future inflation vs. compromising the fragile recovery so far, the board felt that the “downside risks to activity in the near term were somewhat greater than (what is) implied by the inflation report projections”. ... [more] RBA; Rate Hikes an ‘Open Question’ Wednesday, 18 November, 2009 The RBA minutes released yesterday cast doubt over whether the RBA will again hike interest rates at the December meeting. In balancing up the prospects for the Aussie economy the Board said “On the one hand, business and consumer confidence could prove fragile, and economic activity at home and abroad might slow more than expected as the effects of stimulus measures faded. ... [more] Everything Rises against US$ Tuesday, 17 November, 2009 The local currencies were back on the climb overnight as some better than expected economic data in the United States (retail sales and a manufacturing survey, more below) pushed up risk assets and pushed the US$ down. This sees the Kiwi back in the high US$0.74’s and the Aussie just breaking new ground against the greenback up in the high 0.93’s. The Kiwi was roughly stable against the AUD, GBP, Euro and Yen last night as each of those currencies gained against a softer US$ as well. Also lending to the bullish sentiment in Asian and European stock markets last night were comments from the Asia-Pacific Economic Cooperation (APEC) who agreed at the weekend’s summit in Singapore that it is appropriate to maintain stimulus efforts at this time.... [more] Which Way Will We Go? Monday, 16 November, 2009 More of the murky, consolidation type trading occurred on Friday night, this time stocks in the US were back on the climb (although still within the last weeks range) and local currencies edged up again, although also still trading within the recent range. Markets have recently lacked formal direction after the very strong up trend that had defined the past 6-8 months of trading has been scarpered as investors wait to see the next moves from governments.... [more] Is There a Glut Of Oil? Friday, 13 November, 2009 US Stock markets have slumped over half a percent last night, led lower by oil and energy stocks which slipped on news that oil stockpiles in the US are growing at a higher than expected rate. ... [more] GBP Stumbles, Busy Day for Locals Thursday, 12 November, 2009 The local currencies edged back a touch overnight as some Fed speak in the US led the markets toward US$ based assets. Despite the US banks being closed for Veterans Day, the Dallas Fed president Richard Fisher said that economic growth and inflation may remain at persistently low levels through to 2011 which means that lenient interest rates should run through all of next year.... [more] UK Warned Over Debt Wednesday, 11 November, 2009 Markets have cooled off a touch over night after a very bold start to the week; the US$ Index rose slightly which sees the Kiwi about half a cent under yesterday’s peak at 0.7400 and leaves the Aussie just shy of 0.9300. The NZDAUD cross remains around 0.80. The big move in the currency market overnight came from the Pound which fell sharply following an announcement from ratings agency Fitch. Fitch said that of all the AAA rated economies, the UK was at greatest risk of a downgrade. ... [more] G20: Who Wants More Money? Tuesday, 10 November, 2009 Stocks, commodities and local currencies all rallied overnight, driven by the G20 meeting held over the weekend. At that meeting, representatives from all governments (bar India) said they would maintain fiscal stimulus, even as some Central Banks take early steps to remove some of the now unnecessary policies implemented during the crisis... [more] RBNZ: “NZ is not Australia” Friday, 6 November, 2009 Reports last night showing that worker productivity and initial unemployment claims were both better than expected spurred US stock markets on to climb almost 2% overnight. The bullish sentiment was unable to lend support to the Kiwi which was sluggish at best following yesterdays disappointing unemployment data (see below) and comments from the RBNZ yesterday. With nothing to hold the Aussie back it gradually ground higher, this saw the NZDAUD cross rate forced into the low 0.79’s overnight. In a speech titled “NZ is not Australia, but could be their lucky neighbor” given yesterday afternoon, RBNZ Alan Bollard said “Australia has avoided negative growth, and its prospects are driven by strong terms of trade, vast mineral deposits, the Chinese market, and rapid population growth.... [more] FED Signals Tightening, NZ Unemployment at 10.45 Thursday, 5 November, 2009 The US Fed has taken its first steps toward tightening. Rates were left on hold at this morning’s interest rates meeting, although the Fed said it will reduce the purchase program for agency debt to US$175 billion, down from a previous maximum of US$200 million. While the logistics of such a move are unlikely to have any practical implications for this market, it shows that Fed is very carefully embarking on a plan to wind down a portion of the current QE facilities. The Fed said that “in order to promote a smooth transition in markets, the Committee will gradually slow the pace of the purchases of … mortgage-backed securities. The Committee will continue to evaluate the timing and overall amounts of its purchases.” This is essentially a vote of confidence by the Fed that the US markets can return to some form of normal. ... [more] Is the RBA on Hold? Wednesday, 4 November, 2009 The RBA hiked interest rates to 3.50%, the S&P 500 was dragged lower by sliding financials (again), gold hit an all time high (again), Lloyds and Royal Bank of Scotland got a cash injection from the UK government (again) and Warren Buffet bought Americas largest railroad (well, the 77% he didn’t already own). ... [more] Kiwi Still Soft, RBA at 4:30 Tuesday, 3 November, 2009 A mixed bag for the US share markets overnight; financial stocks continue to lose ground as Fed Bank regulators described the banking system as “far from robust”. This was more than enough to offset an earlier rally which was brought on by a better than forecast pending home sales figure (up 6.1% in September vs expectations of no change) and a lift in the ISM manufacturing survey. With US markets undecided about which way to turn, the Kiwi and Aussie sit around Fridays closes at just under 0.72 and at 0.90 respectively. However, this doesn’t reflect their very rocky start yesterday morning. Coming off the back of heavy falls in the states on Friday night, the local currencies were thrown around violently in the light Monday morning trading. The Kiwi and Aussie swung in a +1.5 cent range against the US$ as Pacific and Asian stock markets opened sharply lower yesterday... [more] Wild Ride For The NZD Friday, 30 October, 2009 It’s been a wild ride for the NZD in the past 48 hours. Over Wednesday night we saw it fall from over 0.74 down into the 0.73’s. Then yesterday after the RBNZ announcement we saw it fall further, down to 0.7180 against the USD and almost at 0.80 against the AUD.... [more] No Change from RBNZ until H2 2010 Thursday, 29 October, 2009 In the clearest sign that you could get from a Central Bank, RBNZ Governor Alan Bollard said that “In contrast to current market pricing, we see no urgency to begin withdrawing monetary policy stimulus, and we expect to keep the OCR at the current level until the second half of 2010.” He also said that “There are welcome signs that economic activity is growing again”. So good news all round, interest rates to stay low until the second half of 2010 and some relief for exporters as the NZD has fallen another 0.50 cents after the statement, having plunged 1.5 cents overnight, see below. Well done to the Reserve Bank. ... [more] Markets Poised For RBNZ Meeting Wednesday, 28 October, 2009 The NZD has continued its grind down towards 0.74 overnight, with equity markets closing flat and so providing no reason for the NZD to break its trend. With the RNBZ out at 9.00 tomorrow many investors are waiting to see what Dr Bollard will do, and maybe more importantly say, at the press conference tomorrow.... [more] UK Suffers Surprise Drop Tuesday, 27 October, 2009 US stocks closed down on Friday night, with oil down from just below US$82 to US$78.50 this morning. This caused a round of risk aversion, giving the USD a boost. The USD was also boosted by an article in the Wall Street Journal saying that the Fed will look at signaling possible rate hikes at the start of 2010. This pushed the USD up over 92 vs the JPY to leave NZDJPY in the high 68’s. US stock markets are again down today, with the Dow off around 1.0% as I write. This has been led by the financial sector after reports that a tax credit for home buyers may be phased out in the near future, and speculation that the Bank of America may have to sell more shares to pay back its government bailout. With US stocks’ coming down the USD has gained on further risk aversion, pushing the NZD under 0.75 and the AUD down to around 0.9150, to leave NZDAUD in the mid 0.81’s.... [more] China Buying Itself Friday, 23 October, 2009 US stocks gained back much of the ground lost in yesterday’s session last night as earnings announcements from insurance/finance company Travelers and McDonalds exceeded analyst expectations, fueling investor risk appetite. In a pattern familiar to the past few weeks, risk appetite draws idle US cash into US stock markets, commodities and other asset classes held in foreign currencies. The implication of US$ selling is higher US$ pairs; the Kiwi pushed into the high 0.75’s, the AUD held in the mid 0.92’s, the Euro remained above 1.5 and the Pound recovered from softer than expected retail sales to sit back around recent highs against the US$.... [more] Pound Up As BoE Sees Growth Thursday, 22 October, 2009 The two big stories out overnight were the Bank of England minutes which showed voting members are ready to tighten monetary policy on signs of growth, and strong earnings announcements from Morgan Stanley and Yahoo which saw investors back on the Bid for higher yielding assets. Earnings at Yahoo, Americas no. 2 search engine, benefitted from increased advertisement spending while Morgan Stanley posted its first profit of the year - US stocks were up around 0.50% following this news but then turned negative after analyst downgrades of US lender Wells Fargo erased gains in financial stocks and drove share indexes to close down 0.50%.... [more] Tensions Grow Over Low US$ Wednesday, 21 October, 2009 It appears New Zealand isn’t the only country under pressure from a falling US$; last night the Canadian and Brazilian central banks joined the growing chorus of economies speaking out against the falling US$ which is seeing their currencies forced higher by default, hampering their prospects for recovery. The Bank of Canada warned that the CAD appreciation will “more than offset” fragile growth (which has seen the Canadian dollar fall sharply overnight), while the Brazilian government yesterday introduced a tax on foreign investment ... [more] Optimists Push Stocks, Commodities, Kiwi Higher Tuesday, 20 October, 2009 More positive earnings announcements from the US bolstered risk appetite overnight; Gannet Co (the biggest newspaper published in the US), Texas Instruments and Caterpillar were among the star performers that helped push stock indexes up over 1% to new 12-month highs. This sent the US$ on a bumpy ride lower as investors, encouraged by the signs of recovery in the US, pushed cash into higher yielding assets such as equities, commodities and local currencies. With the US dollar index pushing back to the recent lows, and with commodities pushing higher on investor risk appetite, the local currencies both managed to climb over a cent against the US$ from yesterday afternoon ... [more] Pound Strength Continues, US Banks Still Losing Money Monday, 19 October, 2009 Markets continued to take interest in the Pound on Friday night on the view that the Bank of England may see less need for current quantitative easing; the GBP pushed to its highest level in a month against the US$ and saw the NZDGBP rate weaken from Friday to trade below 0.4525. The minutes from the BoE’s last interest rate meeting are released on Wednesday night which may reiterate a change in the BoE’s currently highly stimulatory policy. The US$ Index continued to dwell around the recent lows which kept the Kiwi and Aussie under last week’s highs, the locals closed around 0.7400 and 0.9150 after Friday night, the NZDAUD cross was stable around 0.8100.... [more] Time To Buy Pounds? Friday, 16 October, 2009 Disappointing earnings announcements from Goldman Sachs and Citigroup initially saw US stocks tumble off yesterday’s 12-month highs overnight, although a rally in oil buoyed industrial and energy stocks later in the session, rectifying the losses in financial shares. Oil jumped US$2.50 (+3%) to US$77.60 per barrel. Broad US$ weakness during yesterdays local trading as well as higher than expected NZ inflation data (see below) saw the Kiwi trade at a fresh high against the US$ yesterday afternoon, although decreased risk appetite following the Bank earnings overnight sees the Kiwi eased back to the mid to low US$0.74’s this morning... [more] US Stocks Surge On JP Morgan, Kiwi Steady. Thursday, 15 October, 2009 US Stock markets were up strongly last night, driven higher from an earnings announcement by JP Morgan Chase that surpassed even the loftiest analyst expectations. Revenue from consumer and business banking activity was scarce but the massive 3Q market moves helped generate record revenue in the investment banking and fixed income divisions. Chip maker Intel released its profits for the 3rd quarter after the US markets closed yesterday which also exceeded expectations. The Dow Jones Index surged over 1% to briefly touch 10,000 (for the first time in 12 months and up from the low of 6,500 on March 6th), the S&P gained by a similar margin. Commodities participated in the rally as well with oil adding a dollar to US$75.30 – also the highest price in over a year.... [more] US Stocks Surge On JP Morgan, Kiwi Steady. Thursday, 15 October, 2009 US Stock markets were up strongly last night, driven higher from an earnings announcement by JP Morgan Chase that surpassed even the loftiest analyst expectations. Revenue from consumer and business banking activity was scarce but the massive 3Q market moves helped generate record revenue in the investment banking and fixed income divisions. Chip maker Intel released its profits for the 3rd quarter after the US markets closed yesterday which also exceeded expectations. The Dow Jones Index surged over 1% to briefly touch 10,000 (for the first time in 12 months and up from the low of 6,500 on March 6th), the S&P gained by a similar margin. Commodities participated in the rally as well with oil adding a dollar to US$75.30 – also the highest price in over a year.... [more] Kiwi Retail Spending; A Positive Sign Wednesday, 14 October, 2009 The markets became a little more cautious overnight as investors, ahead of some US Banks earnings announcements on Thursday and Friday night, followed analysts warnings that US Bank shares are probably now at least fairly valued. Also, Johnson & Johnson’s earnings announcement released last night undershot revenue forecasts. In Europe the ZEW survey of future economic growth unexpectedly slipped from 59.6 to 56.9, further dampening investors expectations. This turned the US S&P500 down around 0.50% from the years high and took the gloss off the local currencies; the Kiwi came back about half a cent to trade between 0.7300/0.7350, the Aussie came off a brief spike above 0.91 (new high for the year) to US$0.9050. The NZDAUD cross edged back above 0.81.... [more] Big Moves In Kiwi As US Earnings Season Kicks Off Tuesday, 13 October, 2009 Big moves for the Kiwi already this week; with the Japanese market shut yesterday there was little support for the Kiwi which slid around 1 cent yesterday afternoon, briefly dipping to the mid-to-high 0.72’s. Overnight, better than expected earnings announcements from Black and Decker and Ford (their stocks up 6% and 7% respectively) drove up stock markets across Europe and reignited demand for the local currencies. US stock markets open up strongly although much of this has now been erased. Intel and Johnson & Johnson crept up over 1% last night in anticipation of tomorrow’s scheduled releases. The Kiwi turned sharply following the announcements, gaining back most of yesterday’s losses to sit back above US$0.73 this morning. ... [more] AUD Keeps On Rising Monday, 12 October, 2009 The USD has risen over the weekend, pushing the NZD down from its highs of just over 0.74 to its current rate in the low 0.73’s. The initial push lower in the USD saw the USD index reach its lowest level since August 2008 at 76.35. However Fed Chairman Bernanke gave the USD a boost in a speech on Friday, saying that the Fed are looking at exit strategies from both loose monetary policy and its QE program. ... [more] More Jobs For Aussies Friday, 9 October, 2009 The USD has continued its recent fall from grace overnight, with the NZD pushing above 0.74 and the AUD braking through the 0.90 barrier. This has left NZDAUD just below the 0.82 level, with the AUD receiving an extra boost from its recent employment numbers (see below). The US Q3 reporting season started yesterday with Alcoa posting a surprise profit to give US stocks a leg up to around +1% as I write. Elsewhere in the US new jobless claims fell to a 9 month low and spending in chain stores has managed to turn positive compared to this time last year. This is the first gain in 16 months. The ECB and BoE both left their monetary policies unchanged. With the NZD ...... [more] Australians Not Keen On Borrowing Thursday, 8 October, 2009 After the excitement of the last week currency markets took a slight breather ahead of the start of the Q3 reporting season, which begins today with aluminum producer Alcoa. We could be in for some volatility, with equity markets leading currencies for the next few weeks. The Euro area GDP came in slightly worse than expected last night, with a contraction of 0.2% in Q2 when the market was expecting only -0.1%, taking the overall contraction for the past 12 months to -4.8%. This has been caused by a decline in consumer spending, investment and falling exports. However this was not enough to push NZDEUR through 0.5000. ... [more] RBA Surprises Markets With 0.25% Rate Hike Wednesday, 7 October, 2009 Yesterday the RBA surprised the market by raising their interest rates by 0.25% to 3.25%. In the statement Governor Stevens commented that “With growth likely to be close to trend over the year ahead, inflation close to target and the risk of serious economic contraction in Australia now having passed, the Board’s view is that it is now prudent to begin gradually lessening the stimulus provided by monetary policy”. ... [more] NZD Moves On Up Overnight, RBA Out Today Tuesday, 6 October, 2009 The NZD has outperformed most of the other major currencies overnight to find itself over 0.73 vs the USD, 0.83 vs the AUD, nearing 0.50 against the EUR, over 65 vs the JPY and around 0.4575 vs GBP. ... [more] US Unemployment Rises for the 21st Consecutive Month Monday, 5 October, 2009 Friday night had the latest US unemployment data, with the market looking for a drop of around 175,000 jobs for September. The actual number was -263,000 jobs, taking unemployment in the US up to 9.8% and the 21st consecutive contraction. Falling employment has the potential to put the brakes on economic recovery by causing final demand to falter. Other economic factors are showing signs of life, but without final demand there is potential for a “W” shaped recovery, with recent rises suffering a fall back as employment catches up. Currency markets fell on the news, with the USD strengthening slightly to leave the NZD around 0.7150. Risk aversion was across the board, with the Euro falling under 1.46 against the USD to leave NZDEUR around the 0.49 level. Interestingly the British Pound managed to hold its ground on the back of improving house prices, taking NZDGBP below 0.45.... [more] US Shares Too Far Ahead Of The Economy? Friday, 2 October, 2009 It’s been a volatile 24 hours in the world of Foreign Exchange. The NZD had traded in around a cent range, moving up towards 0.7240 before losing a cent towards the mid 0.7160’s. This move was caused by large scale risk aversion, with many other currencies also losing out to the USD to leave the NZD broadly unchanged against most of the other majors.... [more] NZD Up On Better USA GDP Thursday, 1 October, 2009 The USD has had a poor night, with the NZD back up over 0.72 and the AUD well over 0.88 to leave NZDAUD just under 0.82. This was caused by investors taking on more risk after US GDP (the second forecast) was improved from -1.2% to -0.7%, an unusual and significant change. Recent statements from the Fed also helped the positive tone, with more coming out last night about how and when to withdraw support for the economy. The view here is that if the Fed are talking about withdrawing support (although not yet – they have commented that the timing of this is critical) then the economy must be on its way towards recovery. The speed of the withdrawal has also been hinted at, and we may see significant and fast hikes in the US interest rate in the future to help get rates back to a neutral level. The NZD and AUD have also been helped by oil prices increasing 5% overnight, while gold has broken the USD 1,000 barrier.... [more] NZ Credit Remains Tight Wednesday, 30 September, 2009 The NZD has eased a touch overnight with US equities and commodity prices remaining in recent ranges. However GBP roared back to life after the Bank of England indicated that they will not be cutting the interest rate offered to depositors for the time being. This would effectively be an extension of Quantitative Easing, so without this going ahead GBP has climbed, pushing NZDGBP back under 0.45. Elsewhere both the EUR and JPY fell slightly after US consumer confidence came in weaker than expected, pushing some risk aversion into the market. Both the NZD and AUD escaped any big fall, although NZDAUD is now just under 0.82 again. This is due to the Australian budget deficit coming in better than expected, generating an extra AUD 5 billion. However the Australian Treasury was careful to downplay this, saying it is a “tentative step forward”, pointing out the overall deficit is still a record AUD 27 billion.... [more] RBA Talks Up Recovery Tuesday, 29 September, 2009 US Stocks have made a comeback after Friday’s poor performance, with the Dow and S&P both up around 1.5% as I write. This is off the back of takeovers in the drug and technology sectors showing that mergers and acquisitions are bouncing back from recent lows. This helped to inspire some more risk taking and helped the NZD to recover from yesterday afternoons blip to the mid-to-high 0.71’s.... [more] NZ Trade Balance Halves From The Start of 2009 Monday, 28 September, 2009 Currency markets are approximately where we left them on Friday afternoon, with no economic data out to give the exchange rate a shove in either direction, although NZDAUD has ground higher towards the high 0.82’s. However the oil price has continued to fall, down to USD 66 per barrel. As mentioned last week, even though NZ is a net importer of oil, the NZD maintains a positive correlation with the oil price. Some market participants are looking for oil to fall to USD 55 per barrel as this could help the NZD off its recent highs, as well as easing inflation with petrol (hopefully) falling in price at the pumps.... [more] GBP Suffers Overnight Friday, 25 September, 2009 The big movement overnight has been in GBP, which lost a couple of cents against the USD (now in the 1.60’s) to bring it to around 0.4450 against the NZD. The main cause of this has been further speculation that the Bank of England will cut the deposit rate offered to banks for balances kept at the central bank. This is almost another form of quantitative easing, pushing more money into the system, hence the drop in the currency.... [more] NZ Out OF Recession, Fed Holds Thursday, 24 September, 2009 The Fed kept US interest rates on hold overnight, with the market deciding to take on a little more risk and selling the USD. The NZD was also boosted by the unexpected rise in GDP to +0.1% (see below) to help it over 0.72 vs the USD. The AUD was also boosted to over 0.87, but the NZD has managed to climb over 0.8250 against it.... [more] NZ Current Account Deficit Declines Wednesday, 23 September, 2009 The NZD has pushed over 0.72 overnight as the USD was sold across the board. The NZD was also boosted by yesterdays better than expected current account (see below) and Fonterra raising their milk payout forecasts by 55 cents to 5.10 per kg in response to rising commodity prices and an improved global outlook. This has helped NZDAUD well over 0.82, despite the AUD climbing towards 0.87 vs the USD itself. Investors have decided to take on risk again, with global stocks and commodities both rising, leading to a USD fall. Markets are also starting to position themselves for tomorrows Fed meeting, where it is expected that in the statement the Fed will talk about keeping rates low for the foreseeable future. ... [more] NZ Current Account – The Big Surprise? Tuesday, 22 September, 2009 With Japan on holiday, markets waited for Europe and the US to begin their Monday and find direction. The USD had a slight come back, with the USD index over 77 and EURUSD back below 1.47. The NZD managed to hold its support above 0.7050 despite the US stock markets trading down around 0.50% as I write. The AUD has managed to hold onto 0.86 to leave NZDAUD in the high 0.81’s. The biggest mover of the night was GBP, now sitting above 0.4350 vs the NZD as worries over the UK banking sector and the possibility of further QE weigh on Sterling. This theme could continue through the week with Japan not back from Holiday until Thursday and markets waiting for the next FOMC decision which is also out on Thursday morning. ... [more] Big Week Ahead For The NZD Monday, 21 September, 2009 Over the weekend President Obama has said that the US economy is starting to show some signs of coming out of recession but will face high unemployment for some time. This has not helped the USD with the USD index slipping to 76 and its lowest level for a year vs the euro at 1.47. This has been caused by the continued optimism over the world economy, with investors happy to put money in as they become more confident that the recovery is underway. As more money comes off the sidelines then other investors become confident, and the cycle continues. The RBNZ may be looking at the NZD with some dismay, as the higher NZD makes an export lead recovery more difficult.... [more] US Housing Climbs, But Buyers Beware Friday, 18 September, 2009 US Data overnight has come in on expectations, leaving markets to look elsewhere for their inspiration. Both the NZD and AUD came off against the USD slightly with a touch of risk aversion coming back into the market after the Dow declined. This is the first negative day in just over a week, and has halted the march up to 9800. ... [more] NZD Keeps On Rising Thursday, 17 September, 2009 The USD continued to weaken overnight, giving the NZD a boost over the 0.71 level and looking towards 0.7150. The AUD similarly benefited, moving towards 0.8750 to leave NZDAUD around the 0.8150 level. The USD was sold on the back of better than expected US data, with industrial production up 0.8% (0.6% expected) and capacity utilisation moving up over a full 1% to 69.6%. ... [more] Cash For Clunkers Sparks Retail Spending Wednesday, 16 September, 2009 Overnight has seen the NZD hold above the 0.70 level vs the USD, and push over 0.4250 vs the GBP as the Pound managed to fall against the US with most other currencies remaining stable. Fed President Ben Bernanke has said “Even though from a technical perspective the recession is very likely over at this point, it’s still going to feel like a very weak economy for some time.”... [more] House Prices Rise, But For How Long? Tuesday, 15 September, 2009 The NZDUSD has made a small comeback overnight, back to around the 0.70 level after dropping yesterday afternoon. The NZD suffered at the hands of worse than expected retail sales (see below), and a decline in the price of oil (off 0.5%), which also pulled the AUD down (both the AUD and NZD are classed as “commodity currencies”, and are effected by the price of all commodities, even though both are net importers of oil). The AUD has now also come back slightly to sit around 0.86 and NZDAUD in the low-to-mid 0.81’s. The RBA minutes are out later today and may help to provide some guidance to the AUD with some investors pricing hikes into their RBA forecasts before the end of this year despite the recent poor Australian data.... [more] NZD Holds Above 0.70 Monday, 14 September, 2009 The NZD starts the week still above the 0.70 mark, mainly caused by the markets persistence in selling the USD, keeping the AUD above 0.86, and NZDAUD in the mid 0.8150’s. The JPY has been the biggest mover over the weekend, reaching into the mid 90’s vs the USD and under 64 vs the NZD as Japanese investors move away from the USD and bring their money home. Now Japan has a new government, there is a feeling that they will focus on the domestic economy, and with lower yields in the US, domestic investors are looking to put their capital to work at home . This week its one year since Lehman’s officially went bust, causing the second wave of the credit crunch, and leading to the mass risk aversion that helped the NZD on its downward path. ... [more] Kiwi Breaks US$ 0.70 Friday, 11 September, 2009 Risk appetite was again at the forefront of the market last night as larger than expected import volumes in the US trade balance data and marginally better than expected initial jobless claims was all that was needed to spur on the wild fantasies of brave new growth that have seen US stock markets up 50% in just the last 7 months. US oil-related stocks were higher overnight on speculation that demand for oil in the US and China will exceed forecasts as a global recovery gets underway. ... [more] RBNZ No Change – High Currency Threatens Recovery Thursday, 10 September, 2009 The RBNZ kept interest rates unchanged at 2.5% at this morning’s meeting, reiterating that they “expect to keep the OCR at or below the current level through until the latter part of 2010”. Dr Bollard said that “the decline in economic activity is coming to an end, and that a patchy recovery is underway” However he said that the high NZD is threatening the economic recovery and a lower currency is needed to help rebalance the economy. The NZD dipped briefly after the statement but has since stabilised around the mid .6900 area vs the USD.... [more] Gold and Oil Jump, Kiwi Pushed Toward US$0.70 Wednesday, 9 September, 2009 Gold rallied sharply last night pushing as high as US$1006 per oz before falling back to yesterdays US$995. Oil jumped a sharp US$3 (5%) to US$71 per barrel ahead of this weekend’s OPEC summit, driven by the idea that a recovering economy and the possibility of a cut in production by OPEC will squeeze demand. ... [more] Kiwi Up To 1-year High; Preview RBNZ Tuesday, 8 September, 2009 The Labour Day holiday in the US meant the North American markets were closed last night, but this was not enough to stop a fresh wave of risk appetite in Asia and Europe. Developments in the US$16.7 billion merger between Kraft Foods and Cadbury in Europe was taken as a signal that markets are beginning to function normally, boosting investor confidence and pushing up local currencies sharply on the opening bell of European equities.... [more] US Unemployment Gives NZD A Boost Monday, 7 September, 2009 The highly anticipated US non-farm payrolls data released on Friday night showed that the US shed a further 216k jobs in August, taking unemployment to a 26-year high of 9.7%, up from 9.4% in the previous month. Economists were looking for job losses somewhere closer to 230k and hence read the result as “good news”. Despite downward revisions to past employment figures, markets rallied following the announcement. The New Zealand dollar was pushed up against a softer US dollar as investors moved from safe haven assets such as US$-denominated government bonds out into more ‘risky assets’ such as the local currencies. The Kiwi gained three quarters of a cent since Friday afternoon’s local trading to close just under 0.6900. ... [more] Markets Wait For US Unemployment Friday, 4 September, 2009 Last night the currency and U.S. stock markets stabilised (after what has been a shaky week) ahead of tonight’s US unemployment announcement. After pushing down firmly on Wednesday evening, the Kiwi managed a half cent rally to 0.68 but this has not managed to hold and we are back in the mid to high 0.67’s this morning. We have been off the recent highs against the Aussie since their strong 2Q GDP result on Wednesday, although a larger than expected Aussie deficit result yesterday afternoon (see below) kept us from falling any further overnight. The biggest mover was again Gold which powered on a further US$10 to sit at US$990.55 per oz this morning. ... [more] All That Glitters Is Not Gold Thursday, 3 September, 2009 Signs of risk aversion continued to build overnight; gold made its biggest 1-day rally since March, climbing US$25 to just shy of US$980 per oz, as the continuing signs of a correction in stock markets lowered demand for equity and caused investors to seek the safe haven status of gold. US bonds are being sought over stocks as well; the yield on 2 and 10 year US government bonds last night pushed down to trade at some of their lowest levels since May as investors seek the relative safety of bonds over stocks. The bounce in gold and yesterdays better than expected Australian 2Q GDP announcement (story below) meant the Aussie was the clear favorite of the local currencies; while the Kiwi slid as low as 0.67 overnight on risk aversion against the US$, the Aussie pushed up a little over half a cent to around US$0.8350. This has seen the Kiwi/Aussie cross jump lower overnight. The pair broke down to trade under 0.81 for the first time in 3 weeks. ... [more] Milk Jumps But Softer RBA Sees Locals Slip Wednesday, 2 September, 2009 It was an up day for the US dollar last night which means it was a down day for the Kiwi; the NZ$ has fallen over a cent from this time yesterday to trade around 0.6750 this morning, despite positive US economic data and news that milk powder prices jumped 25% to a 1 year high of US$2,872 per ton during Fonterra’s overnight auction last night. Fonterra, who account for about 40% of global trade in butter, milk powder and cheese, attributed the jump to much stronger demand. This is a very positive sign for the local economy and for the RBNZ who have recently expressed unease over the highly leveraged dairy sector. ... [more] Chinese Stocks Tank; Kiwi Down Then Up Again Tuesday, 1 September, 2009 It was an abysmal performance from the Shanghai stock market last night as the benchmark Shanghai SE Composite shed 6.75%, taking the total decline for August 23.5% from the peak (<-20% from the most recent peak signals a technical bear market). This saw the Kiwi and Aussie dragged down around half a cent each late yesterday afternoon as risk aversion saw Asian money flowing away from the locals (especially to Japan, see below). A sharp 0.5% fall in the US$ overnight saw the Kiwi, Aussie, Euro and Pound all pushed higher. The drop in the US$ came as some better than expected US manufacturing data reversed the risk aversion selling in the currency markets. The Kiwi sits in the mid to low 0.68’s, similar to yesterday morning, and largely unchanged against our other major trading partners.... [more] Third Time Lucky For Kiwi? Monday, 31 August, 2009 A failure for US stock markets to hold onto last weeks highs on Friday saw the local currencies bumped slightly lower as well; the Kiwi is down half a cent in the mid 0.68’s after a failing to deliver on its push toward 0.69 on Friday. The Aussie has remained a little more buoyant above 0.84 against the US$, the result of this is a half cent softening in the NZDAUD cross rate back to mid 0.81 (probably the most significant move for any NZD pair over the weekend). ... [more] Rally In Oil Gives Kiwi A Boost Friday, 28 August, 2009 A rebound in oil prices and a strong result from US GDP were the key drivers in the markets last night; GDP fell an annualised 1.0% in the second quarter (expectations were for a 1.5% decline), and oil rallied almost 4% off its overnight lows to trade at US$72.50 per barrel, erasing some of the week’s losses and spurring industry and energy related stock in the US to climb. ... [more] NZDAUD back at .8200 as China weighs on AUD Thursday, 27 August, 2009 The good news just keeps on coming for the US housing market; new home sales jumped 9.6% in July, but investors were more influenced by the durable goods data which was slightly below expectations. US Stock markets are slightly down following on from an equally lackluster performance in European equities, and the US$ was generally stronger across the board.... [more] Bernanke: 4 More Years Wednesday, 26 August, 2009 Another round of positive data from the US last night, this time in the form of better than expected consumer confidence and positive house price data, but this was not enough to push markets higher. The US consumer confidence index jumped to 54.1 vs expectations of 47.9, up from 46.6 prior and in housing, the S&P/Case-Shiller index measured its first increase in national house prices since 2006; prices climbed 2.9% from Q1 to Q2.... [more] Does China hold Key for NZDAUD? Tuesday, 25 August, 2009 A strong performance from Asian and European stock markets pushed up the Kiwi and Aussie overnight although US stocks were unable to hold their early break into fresh highs and have since drifted lower (down around 0.25% from the open, -1.25% from the peak) taking most of the shine off the local currencies. US financial stocks in particular were underperforming following comments from SunTrust Bank CEO James Wells who said that lenders will face more credit losses and commercial real estate will falter through 2010. The Kiwi currently shows some of its best buying this year around US$0.6850, sitting just shy of the brief spike toward 0.69 made two weeks ago. The Kiwi was again favoured over the Aussie as well with the NZDAUD cross sitting around yesterdays best at just below 0.82.... [more] Kiwi Powers On Monday, 24 August, 2009 Another eventful weekend in the markets; the Kiwi swung a massive 1.5 cent range over the course of Friday, the Aussie boasted an even wider path, oil just broke into fresh highs and Fed Chairman Ben Bernanke said that the US is “beginning to emerge” from recession at a conference of Central bankers in the US over the weekend. ... [more] Good News Edges Kiwi Higher Friday, 21 August, 2009 Some tentatively positive stories made their way across economists news desks last night, managing to curb what was turning into a week of bearish sentiment; mild risk appetite saw a move away from the US$ which edged the Kiwi and Aussie only slightly higher to 0.6760 and 0.8310 respectively, the NZDAUD cross pulled just under 0.8150. ... [more] Big Swings in Currencies Thursday, 20 August, 2009 Another night of large moves in the currency markets, with most currencies initially down vs the USD on the back of another large fall in the Chinese stock market. This was before comments from Warren Buffett, the world’s wealthiest investor, and Pimco the world’s biggest fixed interest fund, expressed concerns about the scale of USD printing which weighed on the USD.... [more] Kiwi Edges Up On Softer USD Wednesday, 19 August, 2009 Overnight we have seen the USD give up some of its recent strength, with NZD back into the mid 0.67’s. The AUD only managed a small rise to leave NZDAUD around 0.8150. US stock markets have made a bit of a comeback; up roughly 1% after European index’s closed up around 1%. ... [more] NZDAUD Holding Above 0.81 Tuesday, 18 August, 2009 Overnight the USD has continued to make major inroads into the currencies, with the NZD now sitting below 0.67 and was into the mid 0.66’s at one point overnight before making its come back at the end of US trading. The AUD suffered as well, dropping to the mid 0.81’s with NZDAUD still sitting north of 0.81. GBP was pushed down, dropping over 2 cents vs the USD and getting back up towards 0.41 vs the NZD while NZDEUR is still above 0.47. World equity markets declined overnight, with the Dow down around 2% and the S&P off almost 2.5% this morning. The Chinese market was down 6% and the FTSE was off 1.5%. This has been caused by investors getting nervous and withdrawing their cash from risky assets (currencies included) and taking their money back home (mostly back to the US) and investing in assets that have a lower risk profile, such as bonds.... [more] US Consumer Confidence Still Fragile Monday, 17 August, 2009 Over the weekend the NZD has come off its recent highs, back into the mid 0.67’s vs the USD. This was generally a move towards the USD, with the AUD back under 0.83 to leave NZDAUD above 0.81. This is the first time NZDAUD has been above 0.81 since March. The move towards the USD has been caused by a large drop off in US consumer confidence, from 69.0 to 63.2, despite industrial production and capacity utilization coming in slightly better than expected. The consumer confidence data demonstrates that the economic recovery in the US may not be a smooth rise back, with many other indicators still in the doldrums and risk aversion trading still having its part to play.... [more] USD Weakness As Consumers Tighten Their Belts Friday, 14 August, 2009 US retail sales overnight has provided markets with a reason to sell the USD, with the NZD rising to around 0.68 at one point before tracking back into the high 0.67’s. The AUD didn’t quite manage the same rise, coming in just above 0.84 to leave NZDAUD over 0.8050. ... [more] US Fed – Stays with Stimulus for Now Thursday, 13 August, 2009 It has been an eventful 24 hours for the Kiwi and we have seen an impressive 1.5 cent range to prove it; firstly, stories swirled about lower demand for raw material from China which sent the local currencies tumbling. The result; the Aussie dropped over a cent to 0.82 yesterday afternoon, also dragging the Kiwi down around 0.0070 to brush 0.66. Better than expected US trade data and the FOMC announcement helped the currencies rally all the way back up to 0.8340 and 0.6730 respectively. The Kiwi was also up on the crosses from yesterday, currently sitting at 0.4080 against the Pound and 0.4740 Euro. The NZDAUD cross held steady around 0.8050. ... [more] Focus On US Fed Meeting Tomorrow AM Wednesday, 12 August, 2009 The USD managed to continue its recent strength overnight, with the NZD falling under the 0.67 barrier. US stocks are down 1%, with Chinese factory and investment numbers down, giving investors an excuse to take profit on recent gains along with a downgrade in Banks earning expectations in this quarter. With the Chinese experiencing a poor round of data the AUD suffered (China is Australia’s largest trading partner), with the AUD down under 0.83, and where the AUD goes the NZD follows. The NZDAUD rate itself has remained stable. In the US productivity has increased (for those that have remained in a job), while wholesale inventories declined more than expected, leading to a round of risk aversion, providing more support for the USD.... [more] NZD Remains Strong Tuesday, 11 August, 2009 The NZD has again managed to retain it’s recent strength, despite the USD finding buyers against the other major currencies overnight. This has left NZDGBP near 0.41 (which continues its upward trend after the QE program was expanded last week) and over 0.4750 vs the EUR. The AUD didn’t escape, finding itself in the mid 0.83’s vs the USD to leave NZDAUD sitting over 0.8050 and NZDUSD is in the mid 0.67’s. The NZD’s resilience must be frustrating for the RBNZ, who would like to see a lower currency to aid economic recovery. To a certain extent the markets are waiting for the FOMC announcement on Thursday morning. While no change is expected to the interest rate (0.25%) the market is waiting to see if the Fed expands their QE program, so the statement will be of crucial importance. ... [more] More Pounds Anyone? Friday, 7 August, 2009 The big mover in currency markets overnight was the Pound, falling from around 1.70 to 1.6780 vs the USD and back up to around 0.40 against the NZD, coming from around 0.3950. This has been caused by the Bank of England surprising the market by extending their Quantitative Easing program, pumping another GBP 50 billion into the system, on top of the existing GBP 125 billion. That makes a total of NZD 445 billion of new money in the British system. ... [more] NZ and Australian Employment Data Points The Way Forward Thursday, 6 August, 2009 The USD has eased slightly further overnight, and with the Fonterra auction result boosting the NZD we are sitting above 0.67 this morning, and around 0.80 vs the AUD. GBP was given a boost by improved industrial production numbers to lift GBP to around 1.70 vs the USD. However the NZD strength means NZDGBP is at 0.3975.... [more] RBA Holds, Fonterra Milk Prices Up Wednesday, 5 August, 2009 After yesterdays NZ and Australian data (see below) both currencies had a relatively quiet night, moving slightly higher on the back of USD weakness. Markets appear to be having a small rest after the frantic trading of the last week or so. US personal income data was slightly weaker than expected and UK construction slightly stronger, but other than that there was nothing to really push the markets one way or the other, with stocks also roughly flat. The latest Fonterra online auction did show a rise in wholemilk powder prices by 25.8% over the last auction in July was has given the NZD a boost this morning over 0.67 against the USD. Going forward this may be supportive of the NZDAUD cross, with the next announcement on the 1st of September, and the next RBNZ meeting on the 10th. ... [more] USD Has A Night To Forget Tuesday, 4 August, 2009 Last night saw another bout of USD weakness across the board, pushing the NZD over 0.6650 and the AUD over 0.84 to leave NZDAUD largely unchanged around 0.79. The USD index has dropped to its lowest level since the 18th of December (when it had a very brief spike down) and before that the end of September after the Lehman’s collapse. This USD weakness has been caused by strong manufacturing data from the US, UK and Europe (the UK actually had expansion in its manufacturing, rather than just a slowing down of contraction) as well as improved optimism about the banking sector. Two of the UK’s big four banks (HSBC and Barclays) both posted huge profits, far outweighing analysts expectations (Barclays investment banking arm saw profit double, while HSBC was up 125%). Commodity prices also surged (oil rising back above USD 71) while the S&P broke over the key 1000 level.... [more] US GDP Not As Bad As Feared Monday, 3 August, 2009 Over the weekend we have seen risk appetite come back into the market, helping the NZD back up to the 0.66’s and the AUD into the mid 0.83’s with NZDAUD still around 0.79. Some of this has been caused by US GDP for Q2 coming in much better than expectations... [more] Kiwi Slightly Softer on RBNZ Warning Friday, 31 July, 2009 The Kiwi remained around 0.65 vs the USD last night in the wake of yesterdays RBNZ announcement where Governor Allan Bollard warned that the RBNZ would “would reassess policy settings” as the “level of the dollar in particular, is not helping the sustainability of future growth, and brings with it additional economic risks”. The Kiwi was lifted along with most risky assets last night; stocks in the US have climbed over 1% and oil last night rebounded strongly taking back most of yesterday’s US$4 loss to once again trade at US$67 per barrel. The change in heart by investors comes from some better than expected earnings announcements from the likes of Motorola and MasterCard. Also news from the UK that home prices rose 1.3% from June to July (0.2% expected, -6.2 annual vs -7.6 expected) added to the positive sentiment.... [more] RBNZ Holds, Targets Lower Currency Thursday, 30 July, 2009 The RBNZ left interest rates on hold at 2.50% this morning, in line with expectations. Dr. Bollard said that “despite signs of a leveling off in economic activity, the economy remains weak… the outlook remains highly uncertain… the level of the New Zealand dollar and wholesale interest rates are higher than assumed in our forecasts… the forecast recovery is based on a further easing in financial conditions. If this easing does not occur, the forecast recovery could be put at risk. In these circumstances we would reassess policy settings.” In short; if the dollar and wholesale interest rates do not come down, the RBNZ will cut rates. The Kiwi fell over half a cent to just above US$0.65 following the announcement, and back under 0.80 on the NZDAUD cross. ... [more] RBA’s “Glass Half Full”, RBNZ Tomorrow Wednesday, 29 July, 2009 A strong endorsement of the Australian economy yesterday afternoon from RBA Governor Glenn Stevens sent the local currencies flying in the last few hours of local trade, only to see weaker North American stock and commodity prices overnight take the Kiwi back to where it began. Stevens painted an extremely optimistic view of Australia’s position at a scheduled luncheon in Sydney as he said “that the downturn we are having may turn out not to be one of the more serious ones of the post-war era, in contrast to the experiences of so many other countries… it is becoming more common for Australians to see the glass as half full than as half empty”. Questionably bold words from a Central Banker in the current environment. ... [more] Kiwi Quiet Before RBNZ Tuesday, 28 July, 2009 It was a mixed bag for the currency and equity markets last night as strong US new homes sales figures (see below) provided a boost to confidence only to be offset by disappointing earnings announcements from US healthcare giant Aetna and telecommunications company Verizon. US stocks finished up only slightly while the US$ was generally weaker as it drifted back to touch recent lows on the Dollar Index.... [more] UK GDP Down 5.6%, OCR This Week Monday, 27 July, 2009 It was an uncharacteristically quiet Friday night in the markets last week with a lack of US earnings announcements. US Stocks made a very mild advance late in the session to finish up around a quarter of a percent while the NZ$ finished Saturday morning down slightly around the mid 0.65’s. Oil had its 8th straight day of gains finishing back at US$68, and gold finished just up at US$951. With gains in commodities, not surprisingly the Aussie was the outperformer of the local currencies on Friday, rising almost half a cent to just under 0.82 against the US$ this morning. Consequently the NZD/AUD cross was pushed lower as a result, although not low enough to break into the 0.79’s. ... [more] Stocks Jump, Oil Jumps, Kiwi Can’t Keep Up Friday, 24 July, 2009 A very strong performance from US Stock markets last night failed to push the Kiwi through to new highs, a change from the usual pattern of stock driven risk appetite encouraging overnight buying of the local currencies. The Dow Jones Index is currently up 2.3% (the first poke through 9,000 since a failed attempt to break above in January) and the S&P500 is up just over 2.5%; positive earnings announcements for EBay, Ford and AT&T, as well as news that US existing home sales increased 3.6% (1.5% expected) from May to June, contributed to the stock markets strong performance. ... [more] Markets Pause On Bernanke Warning Thursday, 23 July, 2009 The US earnings season continued last night, with Morgan Stanley and Wells Fargo both missing expectations and the Dow is currently down 0.4%, the first negative day is 8. However the NZD continued its recent rise, and was around 0.66 for a small time. It outperformed most of the other major currencies, getting over 0.8050 against the AUD. This was as investors searched for yield and risk aversion continued to be on the back seat. ... [more] More Kiwi’s Than Last Month, But Less Visitors Wednesday, 22 July, 2009 The USD has made a bit of a come back overnight, with the NZD now sitting back down in the mid 0.65’s while the AUD fared slightly better to be around 0.8150 leaving NZDAUD in the lower 0.80’s. This has been triggered by US Fed Chairman Bernanke’s testament to Congress in which he said that although financial markets conditions have improved there is still the possibility of further job losses, and that rates may be kept low for a “extended period”. However he also discussed exit strategies, indicating that they do see light at the end of the tunnel. ... [more] NZD Makes A Solid Break Through 0.65 Tuesday, 21 July, 2009 It was another miserable night for the USD, losing ground to most of the major currencies. The NZD has done better than most, and currently sits over 0.6550 vs the USD. The AUD managed to get over 0.8150 to leave NZDAUD largely unchanged for the time being. This has been caused by more good news from US equity markets, with the Dow up 1.2% and the S&P up 1%, along with news that small business lender CIT has received a rescue package further boosting risk appetite. The Atlanta Fed President Lockhart also indicated that the Fed has tools prepared to exit the monetary and fiscal stimulus they have provided to the economy. This also boosted confidence, as if they are looking at exit strategies then they must feel that the end is somewhere in sight, no matter how far away. ... [more] US Earnings Season Dictates Market Monday, 20 July, 2009 The weekend has seen the NZD remain within its recent ranges, around the mid 0.64’s vs the USD and around 0.80 against the AUD. Factors effecting investor sentiment over the weekend have been the Jakarta bombings and poor results from General Electric making investors more risk averse, while good results from IBM and a rise in US housing starts (up 3.6) and housing permits (up 8.7) helped to push risk appetite up. A common theme throughout the US Bank earnings statements being released last week, losses are still stacking up in credit card operations, mortgages and business loans. Further moves in US equity markets, and therefore to some extent the NZDUSD, will still be dictated by the US earnings reporting season which continues this week. ... [more] Ratings Agency Downgrade Outlook On NZ Friday, 17 July, 2009 Late yesterday afternoon the rating agency Fitch revised down their outlook on New Zealand from stable to negative, citing the large current account deficit and foreign indebtedness. Fitch also stated that “a stronger fiscal adjustment than currently planned may be required to raise national savings and reduce the current account deficit, as well as structural reforms to improve productivity”.... [more] USD Weakness Pushes NZD to 0.65 Thursday, 16 July, 2009 It was a big night for the NZD, pushing up to the 0.65 level on the back of USD weakness. The AUD had a good night as well, getting back above 0.80, but not as good as the NZD which leaves the NZDAUD cross just under 0.81. In fact all the majors made ground on the USD, apart from the JPY with NZDJPY now back above 61.00.... [more] US Retail Sales and Earnings Go Positive Wednesday, 15 July, 2009 The NZD has managed to strengthen a little overnight to leave us around 0.6375 this morning vs the USD and around 0.8050 against the AUD. There looks to be good interest in buying the NZD every time it dips towards 0.62, with risk appetites still in the market. US stock markets have had a relatively quiet night (the Dow is up 0.2% as I write) despite Goldman Sachs Q2 results coming in better than expected. US retail sales also came in better than expected, up 0.6% in June (the market was looking for 0.4%). ... [more] NZ Retail Sales Through The Roof Tuesday, 14 July, 2009 Currency markets have backed off the USD overnight, pushing the NZD up towards 0.6330 and the AUD to around 0.7830 to leave NZDAUD near 0.8070. The key reason for the NZD outperformance was the stellar retail sales released yesterday (see below), coming up from a low base around 0.62 yesterday afternoon. US stocks are up following upgrades to some financial stocks ahead of their financial results being reported later this week which has helped to boost risk appetite, pushing the NZD up. ... [more] NZD Edging Higher against AUD Monday, 13 July, 2009 Looking at the markets from Friday night, movement away from risk was again the overriding trend. With much of the market’s recent ‘risk-aversion’ focus targeted at commodity markets, we are seeing more pressure fall on the Aussie, whose exports include more mineral/metal commodities, than on the milk and wood based Kiwi.... [more] Kiwi Houses Selling Faster Friday, 10 July, 2009 A break from the persistent downwards pressure in the markets last night as the last weeks pessimistic tone wears thin; the Kiwi’s attempts to push lower couldn’t do better than 0.62 against the US$ and it has since rebounded to 0.63, just a touch higher than where we left off yesterday afternoon. The easing pressure on the Kiwi was largely the result of a pause in the price of oil which also benefited from a respite in investor sentiment. After a brief drop through US$60, oil traded back to close this morning just shy of yesterday’s close around US$60.35 - this is the first day in seven that oil has not seen a sizeable move down.... [more] Oil Falls, Kiwi Falls, Aussie Falls Harder. Thursday, 9 July, 2009 Local currencies softened again last night led by yet another bout of weakness in commodities; oil fell a further US$2 to US$60 per barrel capping off a 6th day of straight declines making a decline of 16%. The Kiwi fell a full cent to 0.62 although has regained some of that ground to sit around 0.6250 this morning. The Aussie managed to decline over 1.5 cents from last night’s best to sit just above 0.7750. Gold too fell over 2% last night, taking the price back to US$908.58 and causing the markets to weigh more heavily on the Aussie than the Kiwi - news that China canceled a shipment of coal from Australia playing on markets nerves didn’t help the Aussie either. As a result; the NZDAUD cross rate around 0.80 this morning, up from the 0.7980 of yesterday afternoon. ... [more] Happier NZ Business Points to Growth Wednesday, 8 July, 2009 The drop in oil continued last night, this time falling another US$2 to US$62.50 and dragging down US energy shares with it. The Dow and S&P were down over 2% at time of writing with industrials and energy the hit hardest. Weakness in commodity markets flowed through to the local currencies as well; the Kiwi has lost around half a cent to just below 0.63 in overnight trading, while the Aussie has slipped three quarters of a cent to trade under 0.79 against the US$. The NZD/AUD cross is little changed around 0.7975. ... [more] Kiwi Up, Commodities Lower, RBA This Afternoon Tuesday, 7 July, 2009 The markets were back in full swing overnight after the 4th of July long weekend in the US and this is reflected in a much more active market. The big move has been in oil as last week’s moves away from commodity markets continued. Oil fell US$3 to US$64 per barrel, gold too was off by US$6 to US$924 per oz. Very interestingly, commodity related currencies were not as soft as oil and gold were; the Kiwi in fact managed to rally against a weaker US$, climbing to 0.6340 after briefly falling to a 2-week low below 0.63 last night. ... [more] NZ House Prices on Road to Recovery Monday, 6 July, 2009 A quiet close to the week on Friday night as the US markets closed for the 4th of July long weekend. Softer than expected European retail sales data set a sluggish tone for the session; the NZ dollars attempts to climb toward the mid-63’s were short lived, we are back close to the 0.63 were we left off on Friday. ... [more] US Job Losses Rise; Kiwi Tumbles Friday, 3 July, 2009 Another tumble for the Kiwi last night, this time triggered by worse than expected US employment numbers. The Kiwi has fallen another cent to sit under 0.63 against the US$, fallen a cent against the Aussie to just above 0.79, and come off about a half a cent against both the GBP and the EUR to 0.3830 and 0.4490 respectively. US Stocks took a pummeling as well, currently down 2.6% on the S&P 500, and oil continued to decline (to a 5 week low), dropping a further US$2 to sit under US$67 this morning. ... [more] NZD Falls Further Thursday, 2 July, 2009 The Kiwi continued to lose ground against the USD overnight, falling another 0.50 cents vs the USD after dropping 1.0 cents the night before. It seems the Kiwi’s poor performance was the result of our low liquidity in the overnight markets. Some hedge funds decided to sell a significant portion of NZ$, the size of which was enough to overwhelm the smaller number of potential buyers and consequently, the price was pushed down. The NZD has had a good run since early March rising over 30% but it seems that this run is drawing to an end and so some speculators are starting to cash up their bets. As we have said over recent days the current levels of the NZD vs USD look attractive on a 2-3 month time frame for importers. ... [more] A Change of Heart Wednesday, 1 July, 2009 A change of heart in the markets last night after soft US consumer confidence and mortgage delinquency data caused a quick sell off in stock, commodity and currencies. US Consumer confidence unexpectedly fell to 49.3 in June, disappointing economists’ expectations of 55.3 and down from 54.8 in May. Adding to last night’s about face was a report showing that Q1 delinquency rates (delinquency defined as having payments 60 days past due) for the least-risky class of mortgage climbed to 2.6% of the total, more than double the 1.1% in the same quarter last year. Neither of these are particularly horrendous statistics on their own, but were enough to knock back some of the bolder advances seen in the markets these past few weeks. US stocks are down about 1% with consumer goods leading the moves lower (down 1.5% thanks to the consumer confidence numbers).... [more] Note to Importers; Kiwi Brushes 0.65 Tuesday, 30 June, 2009 A strong performance for everything but the US$ and Yen last night; the star of the show was oil which jumped 3.5% to US$71.50 per barrel as news broke that Nigerian militants attacked a Shell oil field causing its closure and therefore cutting supply. The boost in oil built on the strong local trade data released yesterday, helping the Kiwi jump up to brush US$0.65 last night. The commodity story gave a leg up to the Aussie as well (up half a cent to US$0.8080) but an outperforming Kiwi saw the NZD/AUD return to the mid-0.8000’s. US stocks managed to climb about 1%, albeit the lion’s share of the gains came from oil and gas related stock. ... [more] Kiwi Down Against All But US$ Monday, 29 June, 2009 A softer US$ was the key feature in the currency markets on Friday night, brought on after the Chinese Central Bank, the Peoples Bank of China, reiterated its view that the world needs a ‘global’ reserve currency “to avoid the inherent deficiencies of using sovereign currencies for reserves”. China has openly shown concern before at the scale of money printing which they expect will dilute their significant holding of US Dollar; the Dollar posted declines against all major currencies on Friday night, falling about 1% on a trade-weighted basis. ... [more] Markets Bullish On Bernanke Friday, 26 June, 2009 Bullish sentiment flowed through the American markets overnight as Fed Chairmen Ben Bernanke assured the House Oversight Committee that the Fed acted with the “highest integrity” when it coordinated the Merrill Lynch bailout sale to Bank of America last year. US Q1 growth data coming in just under expectations at -5.5% annualized was considered good enough news for the market to overlook the larger than expected initial jobless claims data also released last night (627 vs 600k expected). US Stock markets are up over 2% this morning, the Kiwi is just below 0.6450 (short term US$ import cover is looking attractive here) and the NZDAUD cross has held around the 0.8000 level.... [more] Current Account at 10.45 This Morning, GDP Tomorrow Thursday, 25 June, 2009 Big swings again in the NZ$ overnight; the Kiwi traded briefly up toward 0.65 before falling back below 0.64, beaten around by fluctuating sentiment driven by US manufacturing data, a US interest rate committee meeting and news of massive ECB lending to European banks. The AU$ had a similar but slightly less impressive ride within a 1 cent range, the NZD/AUD edged up further overnight but has since pulled back to around 0.8050 this morning. US stock markets found enough support from some much better than expected US durable goods data to stop stock falling last night; Orders for durable goods were up 1.8% in May against the -0.9% contraction expected. ... [more] USD Weakens ahead of Fed meeting tomorrow Wednesday, 24 June, 2009 The US Dollar lost ground overnight ahead of tomorrow mornings interest rate review by the US Federal Reserve, (the US Central Bank). The market has backed away from its earlier view that US interest rates would be raised by the end of the year. Instead the market is now factoring in lower US interest rates for longer and as such this weighed on the USD.... [more] Commodity Currencies Slip on Oil’s Spill Tuesday, 23 June, 2009 Very poor performance across the board last night with falls in commodity markets leading the charge. Oil was the main culprit as it shot down US$3.50 (5%) to sit around US$67 per barrel this morning and Gold fell sharply too; the precious metal dropped US$12 (2%) to US$922. Stock markets were not without their own impressive falls - the Dow Jones is currently down 2.40% and the S&P is currently down 3.1% (financials are down 5.8% and commodity stocks are down 6.5%).... [more] Opportunity for European Importers Monday, 22 June, 2009 The very choppy trading patterns of the past few weeks continued on Friday night; the Kiwi swung about in a full cent range to finish up half a cent around 0.6440 against the US$ this morning. The NZD/EUR has managed to hold its ground over the weekend, we are sitting just shy of 0.46 this morning, a level that looks attractive to those importing from Europe. Against the Aussie, the Kiwi also managed to eke out a very modest gain - the cross is up just a touch to 0.7970 this morning after a second attempt to break up through 0.80 on Friday night proved just too difficult. ... [more] Good News and Volatility Friday, 19 June, 2009 Good news and volatility were again the key features of the markets overnight; the Kiwi trod another wide range between 0.63 and 0.6440 against the US dollar, benefiting from good news from that states in the form of a rebound in the Philadelphia Fed’s manufacturing survey and news of a decrease in the number of Americans receiving unemployment benefit each week. The Aussie also managed to finish up against the US$ after its own wide-ranging ride but was unable to match the strength of the Kiwi. As such, the NZD/AUD was able to continue its recent gains, last night touching the 0.80 before pulling back this morning. ... [more] Markets Remain Volatile, Kiwi Gains On Aussie Thursday, 18 June, 2009 More volatility in the markets overnight; the Kiwi has finished up slightly overnight to sit in the mid 0.63’s against the US$, the AU$ is back sitting roughly were it was yesterday around 0.7950. ... [more] Is Risk Appetite Turning? Wednesday, 17 June, 2009 The NZD has made a bit of a come back from yesterday afternoons lows of the mid 0.62’s to over 0.63 this morning, mainly off the back of some USD weakness overnight after two days of USD strength. This is due to risk coming back into the market after positive US data. Both US housing starts and building permits were better than expected, and the market was looking for positive numbers in the first place. German economic sentiment (often used as a proxy for European sentiment) came in at 44.8 while the market was looking for 35. The AUD also benefited to leave the AUD around the mid 0.79’s and NZDAUD over 0.79. It was also the first meeting of the BRIC summit (the worlds largest emerging economies – Brazil, Russia, India and China), who called for a stable monetary system, but importantly did not call for a move away from using the USD as the worlds reserve currency. Lastly the JPY strengthened after the Bank of Japan was very upbeat on their economic recovery going forward. ... [more] USD Back In Favour Tuesday, 16 June, 2009 The USD has continued its strong start to the week, pushing the NZD all the way back to 0.63 and the AUD under 0.80 to leave NZDAUD around 0.7940. This has been partly triggered by poor US manufacturing index data (-9.41 vs -4.6 expected) sparking risk aversion. Slightly worse than expected US housing data didn’t help sentiment, with the IMF and Fed both commentating that recovery will be slower than previous economic downturns. ... [more] Dow In Positive Territory For The Year Monday, 15 June, 2009 On Friday the Dow closed in positive yearly territory for the first time since early Jan and the G8 Finance Ministers commented that they need to prepare exit strategies for the large amount of monetary and fiscal stimulus that has been used in the last year or so. ... [more] NZD Continues To Rise Friday, 12 June, 2009 Overnight we saw the USD continue on its downward path, with the NZD now back in the mid 0.64’s after also being boosted by the generally positive comments from yesterday’s rate review. The USD weakness has also boosted the other currencies, but the NZD has managed to get to the mid 0.78’s vs the AUD, just below 0.39 vs the GBP and the mid 0.45’s the EUR. US stock markets are also well up (the Dow is +1.15% as I write) helping the “risk” trade, and therefore the move away from the USD. US retail sales rose for the first time in 3 months (up 0.5% after a 0.2% drop in April), with the main driver being auto sales stimulated by dealers selling GM and Chrysler stock after their demise. ... [more] RBNZ On Hold, Bollard Tells Banks To Cut Short Term Rates Thursday, 11 June, 2009 he RBNZ has kept rates on hold at 2.50%. In the statement Dr Bollard said "The economic outlook remains weak both in New Zealand and in other countries. However, there are signs that international economic activity is stabilising, and international financial conditions are improving. ... [more] Market Poised For OCR Tomorrow Wednesday, 10 June, 2009 The USD has struggled to maintain its recent gains overnight, with the NZD coming back into the mid 0.62s. This USD weakness was across the board, leaving the NZD largely unchanged against the other major currencies. US wholesale inventories again dropped overnight, by 1.4% (-1.1% expected), demonstrating that for all the talk of green shoots some economic indicators are to yet to show signs of improvement. On the positive side though 10 US banks are ready to repay USD 68 billion of the TARP funds, which allows them greater discretion in their operations and does show that some areas in the world are starting to heal. ... [more] Forget Fixed – Stay Floating Tuesday, 9 June, 2009 Overnight the USD has continued to strengthen, pushing the NZD down to 0.62. This was caused at least in part by the EUR weakening with Ireland yet again being downgraded, and put on negative watch over concerns that its domestic banking industry is in meltdown. However movements on the NZD may be constrained this weak ahead of the OCR on Thursday, where rates are expected to be held with the statement reaffirming that rates will be kept low for a while.... [more] US Payrolls Data Much Better Than Expected Monday, 8 June, 2009 Friday night saw the release of the latest US non-farm payrolls data, which came in much better than expected, at -345,000 jobs when the market expected -520,000. On the back of this the USD gained strength, pushing the NZD back to the mid 0.62’s and the AUD back under 0.80. This is the reverse of recent trends where good economic data has pushed the USD back down. ... [more] Mixed Messages For Australia Friday, 5 June, 2009 Given the last two weeks of volatility markets were relatively quiet last night, with the NZD around the mid 0.63’s this morning vs the USD, and sitting around 0.79 against the AUD. The Bank of England, ECB and Bank of Canada all left rates unchanged (though they could hardly do anything else with them), with the BoE leaving their quantitative easing program unchanged. The Bank of Canada did comment that the strength of the CAD is harming their economic recovery, with NZDCAD around 0.6990 as I write. Away from central banks a rumor that UK PM Brown would resign was dismissed by their office, but this did not stop the pound falling, with NZDGBP back above 0.39. ... [more] Australia Avoids Technical Recession Thursday, 4 June, 2009 USD strength came back into the market overnight, ending the recent poor run for the USD. The NZD now stands around 0.6325, while the AUD has dipped to just below 0.80, leaving NZDAUD around 0.79. This has been caused in part by profit taking by investors and traders, selling winning positions from the last week. US employment and factory data was broadly as expected while a rise in UK services back into expansion helped the British Pound hold some of its recent gains, to leave NZDGBP in the high 0.38’s.... [more] RBA Holds, USD Continues To Fall Wednesday, 3 June, 2009 Overnight has seen yet more USD weakness, with the NZD now well over 0.65 vs the USD. However the USD weakness has also boosted the other majors to leave the NZD broadly unchanged against the other currencies. ... [more] NZD Over 0.65 Tuesday, 2 June, 2009 The USD weakness from last week has continued through the long NZ weekend to leave the NZD over 0.65 against the USD. The DXY USD index (a measure of strength for the USD against the other major currencies) is down over 1.5% as the USD has dropped against all the majors. The NZD has done especially well out of this move, with risk aversion taking a back seat, allowing so called “risky” assets to gain the most. ... [more] NZ Ratings Outlook Upgraded Friday, 29 May, 2009 Overnight the NZD has continued its good work from yesterday, rising up well over 0.62 vs the USD and well over 0.79 vs the AUD. This is off the back of Standard and Poors (S&P) raising NZ’s credit rating outlook from negative to stable after the budget (see review below). In the rest of the world US equities have risen by around 1.5%, pushing the USD down, helping the NZD on its way up. Sentiment also improved after positive US housing sales data, and German unemployment only experiencing a rise of 1,000 people.... [more] Key Budget Day Thursday, 28 May, 2009 There has been a small amount of USD strengthening overnight as US house prices drop slightly against expectations of a small rise. Moody’s rating agency also reaffirmed the US’s Aaa credit rating. The NZD has also remained quiet ahead of today’s budget, out at 14.00. Yesterday we saw the latest business confidence for NZ come out at +1.9% from -14.5% the month before, with confidence up amongst all sectors. ... [more] US Consumer Confidence Soars! Wednesday, 27 May, 2009 With the US and UK returning from their holiday overnight, risk appetite was only slightly restrained after more nuclear testing and missile firing from North Korea. Indeed, the NZD is even up slightly, over 0.6250 and doing well on the crosses and demand for EUR, GBP and AUD was not as strong. Sentiment was also helped by a massive swing in US consumer confidence. The market expected 42.6, which would be an improvement from 39 last time out. Instead it came in at 54.9, the biggest increase in 6 years. This has helped to spur equity markets in the US, currently up around 2.5% this morning.... [more] NZ Trade Balance To Improve Tuesday, 26 May, 2009 With the UK and US on holiday yesterday we have seen thin trading overnight, with rates broadly unchanged from yesterday evening. The NZD has put on a little to creep up to the 0.62 level vs the USD and up over 0.79 against the AUD. The main news yesterday was that the US will provide their dairy farms with a subsidy to combat the European dairy subsidy. However this of course has a knock on to NZ, with dairy being one of the key exports. However the initial drop in the NZD was reversed on the back of continuing USD weakness. The next hurdle will be the NZ budget (Thursday afternoon), with the ratings agency Standard and Poors taking a keen interest after placing NZ debt on a negative watch rating.... [more] USD Slides Further Monday, 25 May, 2009 The move away from the US Dollar continued on Friday night with the greenback losing ground against most currencies. Also on the move were US long-term interest rates as the market backs away from buying a seemingly endless stream of US Government debt. The yield on the US 10 year interest rate rose to 3.45% ahead of this week’s treasury auction of yet more debt. With USD 2.0 Trillion to fund this year alone the market wants a higher yield from the US treasury if it is to keep lending to the US. Whilst 3.45% may still seem low remember at the peak of the financial crisis last December people were willing to lend to the US Government at just 2.0% (see graph below).... [more] More Kiwis Than Last Month Friday, 22 May, 2009 Again the main story through yesterday and overnight has been the continued move away from the USD, with the NZD finding support around 0.60, and then resistance up towards 0.61 to keep it largely range bound. There is talk that the US may lose its top credit rating, and that UK Government debt may also be downgraded. Despite that, positive UK retail sales pushed GBP over 1.58 vs the USD, but it remains in the mid to low 0.38’s vs the NZD. ... [more] USD Continues To Weaken Thursday, 21 May, 2009 The NZD has been relativity quiet overnight; with a brief look towards 0.61 before coming straight back down to the mid 0.60’s, roughly where we were yesterday. The same is true foe the AUD, although NZDAUD is a touch higher. The same cannot be said for the EUR and GBP, both of which pushed on overnight to leave NZDGBP around the mid 0.38’s and EURNZD under 0.44. This is a further extension of the USD weakness that we have been seeing, with the NZD and AUD having already done their dash the rest are playing catch up. The AUD was not helped by a drop in Australian consumer confidence yesterday by 4.3% after the government commented that they may have to push the nation into debt to counter the recession. ... [more] NZD Back Over 0.60 Wednesday, 20 May, 2009 After a solid day yesterday the NZD and the AUD picked up where they left off from Monday night, trading higher off the back of further USD weakness. This is very much a case of the USD losing strength, with the euro and British Pound also rising overnight. However the JPY suffered the same fate as the USD, losing strength as investors take their money off the sidelines and plough it back into risky assets. As such, the NZD is over 0.60 against the USD, just under 58 vs the JPY, and roughly unchanged against the AUD. The AUD itself is over 0.7750 against the USD. European stocks were up between 1% and 2% with US stocks roughly flat this morning. Also helping the good feeling in markets was German consumer confidence coming in at a 3 year high of 31.1 (20 expected) and some unsubstantiated rumors that some US banks are ready to back back the TARP funds they were given last year. ... [more] Stocks Climb and the NZD Goes With Them Tuesday, 19 May, 2009 US and European stocks have had a great start to the week, with the Dow up almost 3% and the S&P (a much broader measure of equity performance) up just over 3% as I write. The FTSE was up 2.25% while Eurostoxx was up 2.5%. All of this has given world sentiment and risk taking a big boost, pushing the USD down against most of the majors. This has pushed the NZD up to the mid 0.59’s and the AUD into the mid 0.76’s with NZDAUD in the mid 0.77’s. The NZD and AUD have outperformed most of the other majors due to their status as risky assets. The push in stocks was been triggered after Bank of America was been upgraded to “buy” status, helping to boost the financial stocks while a further decline in Libor has helped financial stocks on their way. The test will be if this buying pressure can be sustained though the week. ... [more] Market Moves Back Towards USD Monday, 18 May, 2009 The weekend has seen another bout of USD strength, with the NZD and the AUD the main underperformers from this. The NZD and AUD benefit the most when there is a move away from the USD due to the view that they are a riskier asset that offers good return. So when there is a move out of the USD, the opposite applies, leaving the NZD below 0.5850, and the AUD below 0.75. The euro and British Pound didn’t get away with it either, but took less of a hit, leaving the NZD down slightly against most majors. This move is essentially a risk aversion move, partly sparked by very poor Q1 GDP data from Europe (a fall of 2.5%, vs -1.6% in Q4 2009) spooking the market into buying USD. ... [more] Kiwi Consumers Still Spending? Friday, 15 May, 2009 US stocks have broken a 3-day losing streak, with the S&P up 1.5% as I write. This is off the back of a decrease in Libor (the rate at which banks lend to each other) helping financial stocks rise, while technology stocks also rallied after good earnings information. This has helped the NZD and AUD to come back after two days of grinding lower, with the NZD in the high 0.59’s, while the AUD is around 0.76 to leave NZD/AUD in the mid 0.78’s. ... [more] Kiwi Off After Poor US Data Thursday, 14 May, 2009 A change of heart in the currency markets last night has seen the Kiwi lose the 0.60+ title and pushed it back down to 0.59, capping off a 2 cent swing in the last 24 hours after just brushing 0.61 yesterday afternoon. We are not alone though; the Aussie dollar suffered a similar fate falling from 0.77 yesterday afternoon to 0.75 this morning. The Kiwi/Aussie cross has given up this week’s gains to trade in the mid 0.78’s. US Equity markets were not immune as they fell over 2% last night, and neither was the yield on US Bonds which were bid down as cash seeking safety plowed back into the bond market. ... [more] House Sales Up and Kiwi Above .60 Wednesday, 13 May, 2009 Markets have continued to gently rise over the last 24 hours albeit without the vigor of the last few trading sessions as investors come to terms with the lofty new highs in most markets. The big question on the Kiwi at the moment is; will it continue? Well… maybe, maybe not, but to all those importers that have been struggling with sub-55’s for the last few months, surely this reprieve is an opportunity to take some cover in the 0.60’s. ... [more] NZD Holds Above 0.60, Australian Budget Tonight Tuesday, 12 May, 2009 The USD has made a slight come back after losing across the board over the weekend. US stocks are down, with the Dow off 1.9% and the S&P coming off 7 month highs to be down 2.18% as I write. This is due to talk that company valuations have risen above their fair value and some profit taking. This has left the NZD sitting around the 0.60 mark, and the AUD just below 0.76 with NZDAUD near 0.79. ... [more] NZD Smashes Though The 0.60 Barrier Monday, 11 May, 2009 The NZD has managed to get above and stay above 0.60 over the weekend, with the AUD just failing to break through 0.77, to leave NZDAUD in the mid 0.78’s. This is the first time the NZD has been above 0.60 since the 7th of Jan, and even then that was only for one day. The test will be if it can stay above there until tomorrow morning. This leaves the NZD relatively unchanged against most currencies, apart from the USD. This weakness was caused by strong US employment numbers on Friday night, with non-farm payrolls coming in at -539k jobs lost, against 600k expected. This makes it 4 great bits of employment news last week, which is always a great boost for both market and consumer confidence. ... [more] NZD and AUD Pushing Higher Friday, 8 May, 2009 Both the AUD and NZD had strong trading sessions overnight, with the NZD looking towards 0.60, although it has since fallen back to around 0.59. The AUD managed to get up to 0.76, but again has fallen back to around 0.75. This is off the back of the Europeans seeing the positive employment data from yesterday (see below), before profit taking forced them down again. The ECB cut its interest rates by 0.25 (as expected), with a fairly neutral statement not giving the market many clues as to their next move. The BOE left rates unchanged. ... [more] NZD Up Before Unemployment Data Thursday, 7 May, 2009 Overnight we have seen both the NZD and the AUD trade higher off the back of positive Australian data from yesterday (see below). The NZD is sitting around 0.5850, while the AUD is looking at the high 0.74’s, leaving NZDAUD around 0.78. There was also another round of USD selling after good news from the equity markets and the US ADP employment change coming in much better than expected. ... [more] RBA Holds, Kiwi Rises Wednesday, 6 May, 2009 Another good night for the local currencies as the Aussie dollar, reaffirmed by the RBA holding interest rates at 3.00%, rocked on up to just under 0.75 against the US$. The Kiwi was dragged up with it, breaking through 0.58, even having a short run toward 0.5850. Other currency markets remained relatively subdued which gave the Kiwi a chance to take some ground on the crosses; NZD/EUR climbed half a cent to 0.4350, NZD/JPY continued up to 57.50 and even the NZD/AUD cross rate managed to climb back above 0.78 following the RBA’s announcement.... [more] Aussie Rockets Ahead of RBA This Afternoon Tuesday, 5 May, 2009 Strong performance again overnight from ‘risky’ assets; the Aussie dollar rolled into new highs for the year above 0.7350 (preceding the RBA announcement this afternoon) and even managed to drag the Kiwi up half a cent to trade in the mid-to-low 0.57’s. Fueling the good feeling was news that US home sales increased 3.2% in March (no change expected), and that manufacturing in China expanded for the first time in nine months. With fresh confidence the JPY continued to look soft against the US$ (a sign that cash is seeking return) and the Euro jumped a steady cent to 1.34. ... [more] RBA Tomorrow; No Change Expected? Monday, 4 May, 2009 A mild round of investor confidence set the tone for Friday night; a slightly weaker US$ and small gains in equity let the Kiwi and Aussie both climb around half a cent to just under 0.57 and 0.73 respectively. The Japanese Yen continued to weaken against the US$ (a sign of investor risk appetite) and the yield on US 10 year government bonds continued to rise (investors were trading out of the ‘safe-haven’ assets). Preliminary results of the US Feds Bank Stress test were released without too much fanfare; 6 or Americas 19 largest banks are said to need further capital. A full report is expected to be released at the end of the week and we can also look forward to an interest rate announcement from the RBA and NZ and US unemployment data this week.... [more] RNBZ Cuts By 0.5% - Has Your Bank Passed It On? Friday, 1 May, 2009 Overnight has seen the NZD trading roughly where we left it yesterday, around the 0.56’s after the OCR announcement. Data overnight was pretty much as expected, with only euro area unemployment popping up to 8.9% any real surprise (although the value of this is debated when it covers such a massive area with huge variations). US car manufacturer Chrysler has filled for bankruptcy, but avoided sparking another round of risk aversion by announcing its merger with European car giant Fiat. ... [more] RBNZ CUTS BY 0.5% Thursday, 30 April, 2009 The RBNZ has cut interest rates by 0.5% this morning, to 2.5%. Governor Bollard commented that “The main factors behind this are weaker global growth, and an unwarranted tightening in financial conditions via both higher long-term interest rates and a stronger exchange rate than expected”. He also commented that they expect rates to be at, or below the current 2.5% level until the later part of 2010. ... [more] Americans Surprise Markets With Confidence Wednesday, 29 April, 2009 Despite the further spread of swine flu to the US, Canada, the UK, Australia and even NZ, risk crept back into the market overnight, with the NZD bouncing back from the low 0.55’s yesterday to around 0.56 this morning. ... [more] Chinese Hording Gold Tuesday, 28 April, 2009 Yesterday saw some selling of the NZD and AUD on the back of swine flu rumors causing some risk aversion to creep back into the market, pushing the “commodity currencies” down. However the selling was not sustained overnight, with NZD holding in the mid 0.56’s. The AUD has not done as well, down to 0.71 to leave the NZDAUD in the mid 0.79’s for the first time in a week. ... [more] Is the US Dollar set to fall? Monday, 27 April, 2009 The US Dollar lost ground again on Friday night as more signs of stability returned to the worlds financial markets. Equity markets were broadly stronger, long term interest rates rose and the USD weakened.The main US Banks have undergone stress tests over the last month to see if they will need further injections of capital. Whilst the official results are still some weeks away early signs are that most of the Banks will be fine with only of America so far looking like it needs more cash. If we add in signs of a bottoming out in the US housing market then the northern hemisphere summer looks a good deal better than the winter that it has just endured.The NZD benefited from the USD weakness recovering back above the .5700 US level and back towards the .3900 vs the GBP. The NZD was largely unchanged vs the AUD and other major crossrates.... [more] Is The UK Improving? Friday, 24 April, 2009 Overnight has seen a small fall across the board for the USD, with NZD breaking above 0.56, while the AUD climbed into the mid 0.71’s to leave NZDAUD in the mid 0.785’s. US home sales had a small rise in February, although they are near the 4 month average, indicating that maybe the US housing market is starting to bottom out. Equities also had a quiet night, with the Dow and S&P up by less than 1% while European manufacturing and services, while still slowing, are now slowing at its slowest pace for 4 months. ... [more] US Housing Glimmers and Australian Inflation Down Thursday, 23 April, 2009 Currency markets were broadly softer against the US$ last night; the Kiwi slipped over half a cent to 0.5550 as did the Aussie which sits around 0.7050 this morning. The Kiwi/Aussie cross sits just under 0.79. Despite a boost from better than expected house price data, US stock markets struggled overnight as financials fell back ahead of the results of a recent Government “stress test” of the major banks. ... [more] US Banks Have More Capital Than They Need Wednesday, 22 April, 2009 The NZD has pulled back much of the weeks losses to sit in the low 0.56’s this morning, with the AUD sitting around 0.71and NZDAUD around 0.79. This has been partly caused by a recovery in US stocks after US Treasury chief Geithner said that the vast majority of banks have more capital than they need, allying some fears after the Bank of America news yesterday and encouraging some risk taking back into the market. Risk takers were also encouraged by news from Europe that German investor confidence (the ZEW survey) rose to its highest level in two years and its first positive reading since July 2007. This is off the back of recovering stock markets and central bank efforts. Germany is the largest economy in the eurozone area.... [more] USD Back In Vogue Tuesday, 21 April, 2009 Overnight the majors have taken a hammering against the USD, with the NZD sitting around 0.55 and the AUD under 0.70 to leave NZDAUD around 0.79. This has been caused by US equities creating demand for safe haven currencies and cash pouring back into the US. The NZD has been hit hard due to its status as a risky asset and is therefore one of the first currencies to be sold when investors become nervous. ... [more] Market Expectations On RBNZ Shifting Monday, 20 April, 2009 The NZD has lost ground against the USD over the weekend, sitting in the high 0.56’s as I write. Other major currencies also had a poor weekend vs the USD, with the euro continuing its slide down to 1.3050 and GBP just under 1.48. This leaves the NZD as it was against the majors apart from against the AUD, where it sits around 0.7850. This is a case of AUD strength, with Chinese growth looking to support commodity demand, and therefore the AUD. We are also seeing a shift as traders prepare for the next RBNZ meeting, where expectations continue to shirt towards a cut of 0.5%. The drops in the other major currencies have been a symptom of further risk aversion. ... [more] China’s Expansion Slows To Record Low Friday, 17 April, 2009 The NZD has trended lower overnight to find itself just above 0.57 this morning, while the AUD is sitting around 0.72 to leave NZDAUD in the mid 0.79’s. US stocks were up slightly (around 1 to 1.5%) yet the NZD did not follow. This could be because of the OECD report (see below) and the fact that the NZD has performed so well over the last month that a little profit taking is occurring, especially as we near the next OCR on the 30th, with expectations shifting from a 0.25% cut to a 0.5% cut. ... [more] NZD Dow Correlation To Break? Thursday, 16 April, 2009 The NZD continued its drift lower against the USD overnight before staging a rally in the early hours of this morning to keep the NZD in its familiar ranges of 0.5650 to 0.5950. The AUD has shown slightly more promise, having a look towards 0.73 to leave NZDAUD around the 0.80 mark. The data overnight from the US was mixed, with industrial production slightly worse than expected, and Empire Manufacturing much better. The equity markets seem to be more focused on good news than bad, currently up around 1.5%. The Fed’s beige Book also showed that the pace of economic contraction is slowing in 5 out of 12 Districts. ... [more] Bernanke Optimistic On World Economy Wednesday, 15 April, 2009 The NZD has lost a little ground overnight, from being around 0.59 to the mid 0.58’s, while NZDAUD is around 0.8050. This has been caused by some retracement after recent pushes higher in the NZD while US stocks were down on a Goldman Sachs stock issue. US retail sales were not as positive as NZ (see below) with a decline of 1.1% while the market was expecting a rise of 0.3%. This has been caused by further falls in employment (1.3% increase in unemployment since December). However Fed chairman Bernanke stated that he is “fundamentally optimistic about our economy”, but does warn that the global economy is unlikely to embark on a sharp recovery. ... [more] Kiwi Up On US Banks & New Chinese Money Tuesday, 14 April, 2009 Another show of strength from the Kiwi and Aussie dollars over the Easter break puts the Kiwi back over 0.59 and the Aussie over 0.73 against the US$ this morning – that’s the highest Aussie dollar since October last year. Both currencies have benefited from a fresh round of risk appetite as investors prepare themselves for what is expected to be a very optimistic series of bank earnings announcements this week - last week US giant Wells Fargo said net profit was up 50% in the first quarter this year which spurred a +20% jump in US financial stocks last Friday.... [more] QV Says NZ House Prices A Bargain Thursday, 9 April, 2009 Currency and equity markets have had a relatively quiet night as investors square off their books before Easter, with the Dow up 0.6%, and the NZD slightly higher than yesterday afternoon, above the mid 0.5750’s. The AUD struggled a little more, leaving NZDAUD around 0.8150. However the SEC may reintroduce the “uptick” rule for US Equities, meaning you can only short-sell a stock if the last price movement was upwards. This helps to limit panic selling and may help the calm markets in the future. ... [more] RBA Cut 0.25% Wednesday, 8 April, 2009 The RBA cut 0.25% from their interest rates yesterday to leave them at 3.00%, the same as New Zealand. With market expectations ranging from no change to a cut of 0.5% the AUD has been choppy, but currently sits where we were yesterday morning, sitting above 0.71. The NZD has not fared as well; sitting in the mid 0.57’s to leave NZDAUD under 0.81. US equity markets have continued to decline, taking most major currencies with it. US Investment Guru George Soros has referred to the recent rally as a “suckers rally” as equities are rising, yet the US economy is still tanking. ... [more] RBA at 4.30 Today; Cut or Hold? Tuesday, 7 April, 2009 Another round of fresh highs for the Kiwi and Aussie dollars overnight but this time the locals were unable to hold on to their gains; the Kiwi climbed as high as 0.5950 before retracing back to yesterdays high around 0.5870 while the Aussie once again skimmed 0.72 before falling back to trade around 0.71 this morning. The Kiwi/Aussie cross looked set to breech 0.83 last night before it too fell back to currently sit around 0.8250. The stage for the weakening currencies was helped set by US stocks having their first down-day in five; the Dow Jones slipped over 1% last night on profit taking and weaker bank stocks. News that the IBM/Sun Microsystems merger will likely fall over also put a dampener on trading.... [more] Market Moves To Expect No Change From RBA Monday, 6 April, 2009 Over the weekend we have seen a continuation of the weaker USD theme, with the NZD comfortably trading in the mid 0.58’s and the AUD above 0.71. Both benefited from rising commodity and equity prices after the G20 summit trebled the amount of money the IMF has available to support developing economies, and therefore world demand. ... [more] Big Currency Moves Overnight Friday, 3 April, 2009 Big moves overnight as the G20 agrees to USD 1 trillion of funds, while the ECB only cut 0.25%. The NZD rocketing up towards 0.58, the AUD in the mid 0.71’s, the Pound put on a few cents to get over 1.47 while the euro smashed up 2.5 cents to the mid 1.34’s. This has been caused by the G20 meeting agreeing on tighter regulation and USD 1 trillion in emergency aid. Stock markets have also had a great night, with the Dow above 8000 for the first time in two months (up about 3.5%) and the ECB only cut 0.25% from their interest rates (now standing at 1.25%) and deferred a decision on quant easing till their next meeting. ... [more] Bollard Fires Shot at Banks Thursday, 2 April, 2009 Gains again for the local currencies; the Kiwi has recovered a full cent back up to 0.5650 in overnight trading while the Aussie has also continued its rise to back above 0.6950 this morning. On the cross, moves toward 0.8050 proved short-lived and the rate sits back at 0.8125 currently. The Kiwi recovery comes despite yesterday morning’s comments from the RBNZ that long term domestic interest rates are too high knocked the Kiwi off over a full cent in minutes. ... [more] RBA To Hold Rates Next Week? Wednesday, 1 April, 2009 The USD has weakened overnight against most of the majors, with the NZD now looking around the 0.57 area, with the AUD just under 0.70 the leave NZDAUD a tad below 0.82. The AUD outperformed the NZD on the back of rumors that the RBA may hold rates again when it meets next week as they further assess the large fiscal stimulus they have already applied. However this does seem a little strange to us that after their negative GDP figure last time out that they would hold their rates again. In news from the G20 the French have threatened to walk out if an action plan on financial regulation is not agreed. They are probably sulking that they didn’t get to host it…… ... [more] Obama To Let US Car Giants Fail? Tuesday, 31 March, 2009 Overnight has seen stock markets dive on the back of comments from President Obama that he may let General Motors and Chrysler go bankrupt, although this would only be in the short term in order to allow them to restructure their debt. Nevertheless this would severely damage their shares, and markets dived, with the Dow down 4.16% and the S&P down 4.23% as I write. This has dragged the NZD down to around 0.56 vs the USD, and the mid 0.82’s against the AUD. Most other currencies were similarly affected, leaving the NZD at roughly the same levels against them as yesterday. ... [more] NZ GDP Better Than Expected Monday, 30 March, 2009 Over the weekend we have seen a small drop off in the NZD, with recent moves running out of momentum and US stocks falling slightly on profit taking, leaving the NZD below 0.57 this morning. The real loser over the weekend was the euro with comments from the German Finance minister over the current and future creditability of the currency. There have also been rumors that the ECB may join the US, UK and Swiss in introducing quantitative easing to try and stimulate the economy which saw the euro drop two cents vs the USD, and push NZDEUR over 0.4250. The pound also lost out on poor revised Q4 GDP numbers to leave NZDGBP just shy of 0.40... [more] NZD On A Charge Before GBP Friday, 27 March, 2009 Since yesterday afternoon the NZD has been on a charge, coming from the mid 0.56’s and running towards 0.58 overnight. This is partly a USD weakness story, and also some strength returning to the NZD as investors become more confident in the currency. US Q4 GDP (final estimate) came in at -6.3% when the markets expected -6.6%, giving investors some reassurance. ... [more] Markets Volatile on Geithner Confusion Thursday, 26 March, 2009 Very wide ranges in the markets last night with most currencies falling then climbing within a 2% range. The Kiwi fell below 0.56, rose back to 0.57 only to trade this morning just above 0.56 again. Similar were the patterns on the Aussie and Euro which have finished around 0.6950 and 1.350 to the US$, and 0.81 and 0.4150 against the Kiwi. The recent rise in the Kiwi/Euro cross currently presents the best opportunity to buy Euro in over 3 months. ... [more] Markets Hold Onto Gains Wednesday, 25 March, 2009 After another bold rally saw the Kiwi and Aussie dollars trade up over 2 cents apiece to their highest levels for over 2 months yesterday, both had a well earned retreat last night back down to 0.5650 and 0.70 respectively. This saw the NZD/AUD back to just over 0.8050 this morning. In global markets, after yesterday’s massive 7% jump in US stock markets, the major indexes fluctuated between mild gains and losses overnight in a similar fashion to local currencies. One big move though; the Kiwi lost a quick cent against the pound to just under 0.3850 last night after UK consumer price inflation data showed that inflation rose by 3.2% in the year to January, well above the 2.6% expected. ... [more] NZD Hits 0.57 to US$, 0.4180 to EUR; Thanks Obama! Tuesday, 24 March, 2009 The NZ$ juggernaut rolled on last night posting yet another cent climb to 0.57 against the US$ and 0.4150 against the Euro this morning. The Aussie nearly matched the Kiwi’s rally as it raced up through 0.70 against the US$ and 0.5150 against the Euro. Stocks in the US are up nearly 7.0% this morning after the Obama administration released details of their latest plan to rid the clogged banking system of the toxic mortgage instruments. In the Financial sector of the Dow Jones Index has alone climbed 15.5% on the news. ... [more] NZ Has 1,670 New Kiwi’s Monday, 23 March, 2009 Over the weekend we have seen some consolidation as markets adjust to the USD weakness, with the NZD sitting just below 0.56 this morning and the AUD below 0.69 with NZDAUD sitting just above 0.8125. There was also a degree of profit taking in the week’s moves, with the Dow down 1.65%and the S&P down 2.00%. In Europe industrial production declined -17.3% for the year while ECB spokesman Weber commented that rates are “heading down”, and “we have room to maneuver”. This drove the euro rate down, adding to the USD strength. ... [more] NZD On The Fast Track To 0.60 Friday, 20 March, 2009 Currency markets have continued to react to the Fed’s statement yesterday, with the NZD one of the top performers, currently sitting in the mid 0.55’s with the AUD looking towards 0.69, leaving the NZDAUD cross approaching 0.81. This is despite equity markets declining for the first time in a week, with the Dow down 1% as I write. This could mean the decoupling we have seen of the NZD from the Dow is still occurring and may even be over. ... [more] More US Dollars for the World Thursday, 19 March, 2009 In a surprise move the US Central Bank the Federal Reserve has announced plans to inject another USD300 Billion into the US financial system. They will do this by buying long dated Government debt as well as increasing their purchases of Mortgage backed debt. This will have the effect of driving down long term US interest rates and more significantly pushing down mortgage rates in the US which traditionally are based off long term interest rates. This program known as quantitative easing has been implemented by the UK in the last month.... [more] US Housing Rises Against Expectations Wednesday, 18 March, 2009 Overnight the US has released very positive housing data, with housing starts up 583K (450k expected), and building permits up 547k (500k expected). The biggest challenge for the Fed has been to get the housing market restarted, as this is where the majority of consumer wealth is stored. If housing starts to recover then consumer confidence may start to return, giving the economy a much needed boost. ... [more] NZD Rallies As Risk Returns To markets Tuesday, 17 March, 2009 Late yesterday afternoon the transcript of an interview given by Fed chief Bernanke has allayed fears of the recession deepening, saying that if the government can calm financial markets the recession will end this year and we will see expansion in 2010. This has given stocks an added boost to continue last week’s momentum, and encouraging some risk back into the market. Global commodity prices have also risen, helping the so called “commodity currencies”. All this has pushed the NZD to over 0.53, the AUD to over 0.66 and the NZDAUD cross to over 0.80. Elsewhere the euro and Pound both gained, while the JPY remained around 98. ... [more] G20 To Support Emerging Economies, Will Take Whatever Action Is Needed Monday, 16 March, 2009 Over the weekend the NZD has consolidated above the 0.52 level vs the USD, and just below 0.80 against the AUD. We are also over 51 vs the JPY as US and JPY weakness continued with stock markets up on Friday night with Citibank declaring that they don’t need any further government support. There was also the G20 meeting in London, where central bankers and finance ministers have pledged greater support to emerging economies with more funding to the IMF. Emerging economies were supporting underlying global demand in 2007 and at the start of 2008 and the global recession has become much worse since their demand dropped off. ... [more] NZD Over 0.52 vs USD, Approaching 0.80 vs AUD Friday, 13 March, 2009 After yesterday’s rate cut by the RBNZ of 0.5% to 3.0%, we saw the NZD rally to well over 0.52 vs the USD, and nearing 0.80 vs the AUD. Overnight the Dow has rallied over 3%. Now the uncertainty over the interest rate has been removed the NZD can benefit from the falling risk aversion. The JPY has weakened to leave NZDJPY racing towards 51 and even NZDEUR is in the mid 0.40’s. The Dow rally has been caused by better than expected US retail sales, Bank of America predicting a profit and GE looking to post a profit. Looking at the accompanying statement Dr Bolland commented that rates are “very stimulatory” and the rate was unlikely to go below 2.0%. The banks have taken the rate cut and cut their floating rate by around 0.50% to keep inline with the OCR move.... [more] RBNZ Cuts by -0.50%, See Growth At 4% In 2010 Thursday, 12 March, 2009 This morning the NZ Reserve Bank cut the official cash rate by -0.50% to 3.00%. The Reserve Bank Governor indicated that further cuts would be smaller and said there was no need for NZ to go down the road of zero rates as other countries had done. He placed much emphasis on the upcoming recovery and said they saw this starting from the middle of the year. He said that the recovery would be helped by more reduction in Bank lending rates and Banks continuing to lend. Overall this is a more upbeat outlook to today’s MPS and this combined with NZ retaining its interest rate advantage should prove a boost for the NZD which is back towards .5100 vs the USD and back above 78.00 vs the AUD.... [more] What A Difference A Day Makes! Wednesday, 11 March, 2009 In the US trading session Citibank shares jumped 33% after they said they are having their best quarter since 2007, spurring speculation that we may be approaching the bottom of the banking crisis. Bank of America is up 25% and JPMorgan up 19%. This in turn gave stocks a rally, with the Dow up 5.1%, the S&P up 5.7% and the NASDAQ over 6%. This has given the NZD a boost back towards 0.50, although Thursday’s rate cut has constrained market reaction. NZDGBP is also climbing back towards 0.37 as the UK was the only major currency not to rally. This was on the back of poor industrial production numbers, declining twice as much as economists predicted. ... [more] NZD Gearing Up For OCR Meeting Tuesday, 10 March, 2009 The overnight European and US trading session have seen another round of risk aversion, pushing the NZD below 0.4950 and the AUD towards 0.63 to leave the NZDAUD sitting just below 0.78 ahead of Thursdays OCR meeting. This appears to have been caused by a variety of factors. Firstly the Japanese current account produced its first deficit in 13 years as its exports heavily declined and corporate bankruptcies rose 10% in February. Secondly the Lloyds bank story from yesterday had its first chance to affect trading sessions, with GBP losing over 2.5 cents, down to 1.38 vs the USD and is approaching 0.36 vs the NZD. Thirdly the World Bank said that “world trade is on track to record its largest decline in 80 years”. ... [more] Market shrugs off jobs data, NZD higher Monday, 9 March, 2009 Over the weekend another UK bank has found itself in big trouble, with LloydsTSB being bought by the UK Government, who now own 77% of the bank after the Government backed it in its rescue of mortgage lender Halifax Bank of Scotland (HBOS). The government will now insure GBP 260 billion of assets for the bank and now finds itself the majority shareholder in two out of the big four UK banks. However GBP does not seem aversely affected and there was not the major risk aversion in markets this sort of news may have caused. ... [more] Europe Cuts Rate, BoE Turn On The Printing Presses Friday, 6 March, 2009 Last night the Bank of England cut interest rates to their lowest ever level of 0.5% and said they will start to print money (as much as GBP 150 billion) in order to purchase government and corporate bonds, thus putting more money in the system and hopefully kick starting the recovery process. The ECB also cut their rates, down 0.5% to 1.5% and signaled that they are ready to cut more in the future if they need to. However ECB President Trichet said he is not ready to start using other policy tools in the same way as the Fed and BoE have done. ... [more] Australia’s GDP Drops For The First Time In 8 Years Thursday, 5 March, 2009 Overnight has seen the USD weaken against most major currencies, with NZD around 0.5050 and the AUD nearing 0.65. Even the Pound managed to get above 1.41 while the euro sits at 1.26. However the big mover is JPY, which is nearing 100 vs the USD, and back above 50 vs the NZD. This has been caused by US equities and oil rallying on news of the Chinese stimulus plan and Chinese manufacturing coming is positive.... [more] RBA Surprise Markets with Interest Rate Hold Wednesday, 4 March, 2009 Yesterday the RBA left the interest rate unchanged, against market expectations of a cut of 0.25%. This gave the AUD an immediate 40 point boost over the USD, pushing the NZDAUD cross below 0.78 where it has stayed all night. The accompanying statement pointed out that credit markets have improved and that demand has not weakened as much as in other countries, with Australia seeing less contraction. ... [more] Biggest Corporate Loss In History Posted Overnight Tuesday, 3 March, 2009 Overnight has seen markets fall further as American Insurance Group (AIG) announced a USD 61.7 billion loss (the biggest in history) and a new government cash injection of around USD 30 billion, sparking risk aversion across the globe. However the NZD was one of few assets to escape a large drop, with the NZD around 0.4950 this morning as markets await the RBA result this afternoon. ... [more] NZ Trade Balance Improves Dramatically Friday, 27 February, 2009 The JPY has continued its slide against the US overnight, sitting around 98.50 as I write, which brings JPY back above 50 vs the NZD for the first time in a month. The NZD is back above 0.51 and the AUD above 0.65 with GBP and the euro also having a good night. With the USD and JPY losing strength overnight we are seeing investors making a cautious return to risk despite a unexpected rise in US unemployment and a fall in durable goods orders and new home sales dropping 10% over last month. This is because of positive news of help for US and UK financial institutions, leaving European equities up around 2% and US equities flat.... [more] Risk Aversion Dominates Markets Thursday, 26 February, 2009 Overnight we have seen large scale risk aversion, with the NZD back below 0.51, and the AUD below 0.65 leaving the NZDAUD cross just below 0.79. The biggest loser was the British Pound, falling from the mid 1.45’s to just above 1.42, while the JPY continued to weaken with it now standing at 97.50 vs the USD and just below 50 vs the NZD. The risk aversion was triggered by US mortgage applications falling 15.1%, caused by buyers facing financing difficulties and by the Bank of England commenting that the recession may intensify “significantly” which in turn sparked fears over the Euro economy. UK GBP also fell 1.6% in Q4. ... [more] Early Signs; The Return Of The Carry Trade? Wednesday, 25 February, 2009 More encouraging signs for the currency markets last night; US Stocks managed to rally over 2% on news of new Treasury measures for US banks and the Japanese Yen continued to weaken across the board – the Yen has eased by more than 10% this year against the US dollar. ... [more] Economic Calendar Tuesday, 24 February, 2009 After a quiet start to the week we see NZ trade and migration data, both of which are important to a small open economy. Migration is a key driver of house prices, while a negative trade balance needs to be funded somehow. There is also UK GDP and Euro inflation and unemployment, all of which are expected to be negative and could drive their currency lower. ... [more] Markets React Strongly to Further Bank Bailout Tuesday, 24 February, 2009 US stock markets fell overnight with the S&P 500 index briefly fell below its lowest point since 1997 before paring back losses to around -2% - just above the lows reached in November last year. Markets are watching this level very closely as a significant break below this level may trigger further moves lower. ... [more] Euro Rally Helps Kiwi Hold Monday, 23 February, 2009 Mixed fortunes for the NZD on Friday night as it dipped below 0.5050, dragged down by US stocks falling over 1% before a rally from the Euro caused some USD weakness, pushing the NZ$ above 0.51. The Euro rally was caused by comments from the European Central Bank that they are willing to take cohesive action to provide a coordinated response to those EU economies in need as a whole, rather than pursue separatist economic policies. In commodities, gold briefly broke up through US$1000 per oz for the first time since last March - partly on safe haven buying and partly on a slightly weaker US$.... [more] Quiet but Encouraging Friday, 20 February, 2009 Quiet but encouraging would be the words to describe the markets last night; the Euro came back nearly 2 cents to just under 1.27 to the US$, Yen strength continued to subside (which is generally a very good sign of easing risk aversion), US stocks were roughly flat despite some poor performance from tech stocks, and even the Kiwi and the Aussie posted gains. The Kiwi is up half a cent to 0.5150 and the Aussie scaled a full cent to 0.6450. These moves come after equity and currency markets were firmly on the back foot earlier in the week, with most markets threatening to test the recent cyclical lows that were set in late 2008. ... [more] Markets Pause at Critical Point Thursday, 19 February, 2009 Thankfully it was rather a quiet night in the markets last night as investors paused to consolidate after this week’s mad dash south. US Stocks were roughly flat as was the Kiwi dollar, easing back up slightly to 0.51 to the US$. The most significant mover last night was the Japanese Yen which weakened 1.5 Yen to ¥93.70 to the US$. This is an encouraging sign that risk aversion may be easing as the Yen normally strengthens very quickly at the first signs of unrest. ... [more] Doubts In Europe See Markets Softer Wednesday, 18 February, 2009 Risk aversion swept the markets again last night on concern for the future of the US financial industry and questions were again raised over the stability of those countries on the peripheral of the Euro. Banks in the key Euro-zone countries own the vast majority of the loans made to Western European countries such as Latvia, Hungary and the Ukraine. ... [more] Japans Woes Weigh On The Kiwi Tuesday, 17 February, 2009 With the US on holiday yesterday markets were quiet as they await the US reaction to the Obama plan being passed though the Senate, and the details of the plan coming to light. However the Japanese released their GDP data, with the economy declining 3.3% in Q4 2008, more than expected, and the third straight quarter of decline. ... [more] NZ Retail Sales Continue To Decline Monday, 16 February, 2009 The NZD and AUD have had a relatively quiet weekend, opening the week approximately where we left them on Friday, just above 0.52 and in the mid 0.65’s vs the USD respectively with the NZDAUD cross still below 0.80. US stocks were down around 1.0% on Friday, leaving little to stimulate the currencies despite the Senate approving the latest bail out plan. ... [more] US Not Sweet On Obama Plan Friday, 13 February, 2009 The NZD has given back some of yesterdays rally to be around 0.52 this morning, as speculation mounts that Obama’s bail-out plan will not be enough to rescue the world economy, sparking a round of risk aversion. The same is true of the AUD, GBP, EUR, leaving the NZD largely unchanged against them. There was some good news out f the US as retail sales came in better than expected, rising 1% in January. However stock markets were not as positive on the news, with the Dow and S&P both down around 1.7% as I write. ... [more] Obama’s Stimulus Package Passes, Markets Fall Wednesday, 11 February, 2009 Both the Kiwi and Aussie dollars were on the back foot last night as concerns that the economic stimulus plan put forward by President Obama and his Treasury Secretary Timothy Geithner will not be forceful enough to turn the US economy around. The US$838 billion stimulus package passed through Congress by a vote of 61-37. Geithner said that they are “exploring a range of different structures for this program”. ... [more] Is The Tide Turning On The US$? Tuesday, 10 February, 2009 Another encouraging performance for ‘risky’ assets last night; US Stocks managed to hold on to last week’s gains (although further progress was soft), the Kiwi and Aussie powered on to buy US$0.54 and US$0.68, and the Kiwi even managed to sneak up to 0.7950 against the Aussie. Obama is back on the trail drumming up public support for his US$800 billion plus stimulus package. The President has asked Congress, who currently has the bill, to pass the vote by Friday.... [more] BoE Cuts, ECB Holds, Non-Farm’s Drop, and Kiwi Rises. Monday, 9 February, 2009 Markets were broadly stronger over the weekend despite the hurdle of 2 major central bank announcements and weaker than expected employment data out from the US. The Dow climbed and impressive 2.7% and where the Dow goes these days the Kiwi tends to follow. The Kiwi climbed to finish above 0.53 on Friday night. ... [more] NZ Credit Rating Reaffirmed Thursday, 5 February, 2009 This morning the NZD and AUD stand pretty much where they were yesterday, with the NZD around 0.51 and the AUD in the mid 0.64’s, leaving the NZDAUD cross sitting below 0.79. Good news from the US as mortgage applications shot up from -38.8% in December to 8.6% in Jan, while less people were made unemployed than expected and the pace of contraction in manufacturing has slowed down. ... [more] RBA Cuts 1% Down To 3.25%, AUD$ 42 billion Fiscal Stimulus Announced Wednesday, 4 February, 2009 Yesterday after the RBA delivered the 1% cut that was widely expected, down to 3.25%, prompting the AUD and NZD to climb above 0.64 and 0.51 against the USD where they have remained, with the NZDAUD cross just below 0.79. The Australian interest rate is now at the lowest rate since 1964, and lower inflation, which is predicted to carry on falling, has allowed the RBA to cut so aggressively. ... [more] NZD Tests .5000 vs the USD Tuesday, 3 February, 2009 After being soft throughout the NZ session yesterday, the NZD broke through the 0.50 barrier last night reaching a low of 0.4960 before rallying all the way back to 0.5050 this morning. The AUD had a similar, less pronounced run, largely due to positioning for the Australian interest rate meeting at 4.30pm today. The NZDAUD cross sits just below the 0.80 barrier, having fallen into the low .7900’s yesterday. ... [more] RBNZ Buys More Insurance Friday, 30 January, 2009 It has been a busy 24 hours in the market! We started early yesterday morning with the news that President Obama is looking to create a “bad bank” to free up bank balance sheets by isolating all the toxic assets into one vehicle, then the US Federal Reserve told us that while they can’t cut rates any further, they are prepared to purchase a serious amount of long-term bonds to help drive down future borrowing costs, and finally, of course, our own RBNZ cut interest rates by 1.50%. The next big event for the market is US GDP due out this evening, and then the Reserve Bank of Australia’s interest rates announcement next Tuesday.... [more] RBNZ Cuts by 1.5%; Official Cash Rate now 3.5% Thursday, 29 January, 2009 The RBNZ cut interest rates by 1.5% to a record low of 3.5% this morning. Dr. Bollard said that “the news coming from our trading partners is very negative. The global economy is now in recession and the outlook for international growth has been marked down” and that “given this backdrop it is appropriate to take the OCR to a more stimulatory position”. The RBNZ said that they had felt that the NZ economy had reached the bottom, but now feel that NZ is “probably in recession for the first part of this year”. The Kiwi has fallen a cent to just above 0.52 against the US following the announcement, and to around 0.79 against the AU$. The falls come off the back of what was largely a good night for the Kiwi, signs the President Obama’s team are working on a potentially viable strategy to evade further risks to the US economy has seen US stocks up over 2% last night which helped the Kiwi climb above 0.5350 early this morning. ... [more] RBNZ To Cut Tomorrow Wednesday, 28 January, 2009 The NZD has remained within a tight range against the USD overnight, briefly popping into the low 0.53’s but with the RBNZ announcing its interest rates tomorrow morning, we are very much in wait and see mode. US consumer confidence for January came in slightly less than expected at 37.7 (39 expected), which is the lowest level on record. US house prices also dropped as credit evaporates. ... [more] US Housing Bounces Back Tuesday, 27 January, 2009 Overnight we saw a small rally in the NZD, getting up into the 0.53’s, with other major currencies also gaining against the USD. This is at least partly due to some good news from the US, encouraging investors to take on some risk. The good news was that US existing home sales unexpectedly increased, albeit from a record low, with sales up 6.5% from November encouraged by low prices and low interest rates. ... [more] More US Housing Woes Friday, 23 January, 2009 Overnight has seen US stocks down slightly, with the Dow minus 0.5% and the S&P down 0.2% as I write. However the NZD has not followed its recent pattern and followed them down, sitting around the same kind of range we have seen in the last few days, between 0.5150 and 0.53. The same is true for the AUD, around 0.65, leaving the NZDAUD cross just above 0.80. This may be because we are seeing a return of risk appetite to the market and some less negative data form NZ in the last few days. ... [more] NZ Retailing Better Than Expected Thursday, 22 January, 2009 US Stock markets managed to rally last night, but they haven’t managed to rally the Kiwi with it. The Kiwi has been under pressure in the last week, hit by a concoction of risk aversion from the US, and more trouble in the credit markets as significant losses from UK banks threaten their viability. Speculation on Obama’s bailout plan fostered a rally in US Financial stocks (supportive for the Kiwi), while the woes in the UK drove the GBP into fresh lows at 1.37 to the US$ (weighing on the Kiwi). ... [more] Kiwi Hit With Further Losses Wednesday, 21 January, 2009 Currency markets were largely weaker against the US dollar last night; the NZ$ fell a further cent to 0.5225, the Aussie stumbled to 0.65, the Euro continued down to 1.29 and the Pound made an 7 year low falling 5 cents to 1.39 this morning. The Kiwi fell to just above 0.80 against the Aussie dollar. These moves were mainly caused by yet another round of risk aversion as a 10% decline in the US financial sector managed to drag the US Stock markets down over 2% last night. Financials were plagued with another round of disappointing earnings announcements and concerns that European banks may need more capital. ... [more] Pound Hit By Bank Losses Tuesday, 20 January, 2009 With the US markets on holiday overnight it was a quiet night for the Kiwi and Aussie dollars; equities were softer through the UK and Europe, and oil slumped back towards recent lows around US$34.50. The GBP was the big mover in the currency markets last night as it fell 4c to 1.45 against the US$, and weakened 0.6p to 0.3760 against the NZ$. The markets are likely to remain up-beat overnight in anticipation of Barack Obama’s inauguration speech this evening. ... [more] Kiwi Breaks Losing Streak Monday, 19 January, 2009 The Kiwi managed to break its week long losing streak on Friday, rising to 0.5450 against the US dollar after trading as low as 0.5280 on Thursday. The gains in the Kiwi out-paced the Aussies half cent climb to 0.6750 against the US dollar, which saw the Kiwi/Aussie cross get a small boost to 0.8120. Despite the rally, these relatively low levels on the Kiwi still provide ample opportunity for exporters to consider adding cover. US Stocks managed to rally almost 1.00%, and oil made a tentative turn off the US$34.50 low to close at US$36.50 per barrel.... [more] ECB Cuts to 2%, Kiwis Fall Continues Friday, 16 January, 2009 Last night the European Central Bank cut rates by 0.50% to 2.00% and signalled intentions to keep rates on hold at the next meeting in February but possibly make another cut in March. In the press conference, President Trichet reaffirmed his reluctance to take Euro rates down the path to zero like his contemporaries in the US, UK and Japan. The size of the cut disappointed market watchers who have criticised the ECB for reacting too slowly to the economic turmoil. ... [more] Risk Aversion Runs Rampant, ECB To Cut Tonight Thursday, 15 January, 2009 US retail sales were down -2.7% (-1.2% expected), and excluding autos they were down --3.1%, with -1.4% expected. This is the 6th month in a row that retail sales have fallen, despite interest rates being cut, mortgage payments falling, tax cuts, cash handouts, government bailouts and heavy store discounting. These are being outweighed by rising unemployment, falling house prices and tighter credit. Import prices also fell, and business inventories declined by more than expected as firms used their existing stock, rather than buying new stock. ... [more] Kiwi Loses Ground Overnight Wednesday, 14 January, 2009 Overnight the NZD has suffered a radical fall, as traders continued the sell off that began yesterday. The key events for New Zealand yesterday were the Business confidence survey, and S&P announcing their view on the NZD; neither of them were good news. The business survey dropped from -19% in Q3 to -64% for Q4, with the profit outlook the worst for 26 years and 44% of companies said trading had fallen for the three months to December 31st., with 49% said profits will decline. Perhaps the biggest pitfall is the 32% who expect to fire workers in the next 12 months. Overall it’s the most negative report since records began in 1970. Capacity utilization also fell away as demand for goods drops off. All this may prompt the RBNZ to cut rates further on the 29th, with some commentators even calling for a 1% cut. ... [more] Key Calls Meeting Of Economic Officials Tuesday, 13 January, 2009 Overnight has seen another round of risk aversion as US stocks continue their fall from the back end of last week, with the Dow down 1%and the S&P at 1.5% as I write. This has been caused by lower oil prices putting pressure on energy stocks and concerns on firms reporting their financial results, which begins after the market closes this morning. Things are no better in Europe where the Spanish government has had their credit rating put on credit watch and speculation continues to mount on the size of the ECB rate cut this week. This has left the euro under 1.34 against the USD, and around the mid 0.43’s vs the NZD. The NZDAUD is just off 0.85 as the AUD was put under additional pressure as their biggest trading partner, China, released more negative manufacturing data as well as demanding lower iron ore prices.... [more] US Job Losses Begin To Mount Up Monday, 12 January, 2009 It looks like a quiet start to the week, with the NZD and AUD not changing significantly over the weekend as liquidity remains light, although this should change during the week as more business’s return to work. Friday night saw the release of the US non-farms payroll data, which declined for the 12th month in a row, down 524,000 jobs (525k expected) with unemployment climbing to a 16 year high of 7.2% and a total of 2.6 million jobs lost in 2008, the biggest annual number since 1945 and more than the entire working population of New Zealand. ... [more] UK Interest Rates Lowest Since 1694 Friday, 9 January, 2009 After a soft day yesterday, the Kiwi and Aussie dollars were able to stabilize overnight to hold just above 0.59 and 0.7050 respectively. The US stock markets, which have been so influential recently in mapping the path of the Kiwi and Aussie dollars, faltered last night after poor retailing and earnings forecasts from consumer-giant Wal-Mart dragged the company’s stock down 10%. The Dow Jones is currently down around 0.50%. Markets will likely remain quiet today in anticipation of this evenings US non-farm payrolls data, especially after the shock 533K drop in November that pushed unemployment to 6.70%, its highest level since 1993. Incoming president Barak Obama will be under scrutiny to see if he can deliver on his post election promise to create or save 2.5 million jobs in the States; the data due out Friday night NZ time is expected to add 500k more job losses to the 1.91 million already lost in 2008. ... [more] NZ Export Booms and US Job Loss Worries Mount Thursday, 8 January, 2009 The recent spate of buying that had helped push up the Kiwi and Aussie dollars over the last few weeks eased last night. The Kiwi fell half a cent to 0.5950, the Aussie fell a full cent to 0.7150, oil fell US$5 to US$44 per barrel and US Stock markets are currently down around 2.50%. Part of the change in pace was due to the American ADP Employment Change survey which suggested that the States shed -693k jobs in December, well above the -495k job losses expected. The ADP Employment Change survey is released before the highly anticipated US non-farm payrolls data which comes out on Friday night. The markets are particularly sensitive to this months survey because of the nasty surprise the data gave in November when job losses exceeded half a million in a single month, nearly 200k more job losses than expected. ... [more] Markets Winding Back Up To Speed Tuesday, 6 January, 2009 Overnight has seen some big moves in the euro and the JPY, as both have fallen against the USD, and therefore the NZD as the Kiwi has remained stable. The driver of these falls has been further details of the Obama stimulus plan coming to light, with more then USD 800 billion being spent to push the economy out of recession. ... [more] Kiwi and Aussie Climb Monday, 5 January, 2009 Off to a good start in what could be quiet markets for the next few days. Both the Kiwi and Aussie dollars managed to rally over the New Years break, the Kiwi currently stands around US$0.5850 while the Aussie has managed to climb back over US$0.71, its highest close in 6 months! The rally was spurred on by a strong close to the year in the US stock market (the Dow Jones Index closed above 9,000 for the first in 2 months) as well as broad gains in commodity markets. Gains in oil gave US energy stocks a boost, and after American new jobless claims came in better than expected (472k against the 575k expected for the week ended 27 Dec), retail and consumer stocks joined in on the rally as well. ... [more] Kiwi and Aussie Edge Higher on a Soft US$ Tuesday, 30 December, 2008 The Kiwi and Aussie dollars made tentative gains against the US dollar again last night on what was largely another quiet night in trading. The Kiwi climbed 2/3rd’s of a cent before settling to trade under 0.58 this morning while at one stage the Aussie had made over a full cent against the US$ before paring back to just above 0.69 at the moment (still half a cent up on yesterday’s close). On the cross, the Kiwi could not quite keep pace with the Aussie gains which saw the Kiwi down to trade at AU$0.84 this morning. ... [more] Kiwi Stays Firm in Quiet Market Monday, 29 December, 2008 Markets have remained relatively quiet with the holiday period; the Kiwi has firmed slightly to 0.5750 against the USD, as has the Aussie which is at 0.6840 this morning. International stock markets have remained either flat or slightly up on very thin turnover. Probably the biggest mover over the break has been in oil which has fallen from $43 per barrel down as low as $35 since the 22nd of December (that’s a 15% range) as investors price in further falls in demand from the slowing global economy. ... [more] NZ GDP Declines Less Then Expected Wednesday, 24 December, 2008 Overnight there has been some strength in the USD, with investors squaring off their books before the festive period. Further weakness in the British Pound occurred as GDP fell by 0.6%, larger than the 0.5% expected. The final estimate for US GDP was also released, shrinking by 0.5% in Q3. US housing data was also down, with sales of new and existing housing dropping 7.6%... [more] NZ Trade Deficit Widens, GDP To Fall? Tuesday, 23 December, 2008 New Zealand’s current account deficit released yesterday morning showed that the deficit has widened to NZ$ 15.51 billion for the year through to September, from NZ$ 14.98 billion in the year to June. This represents 8.6% of GDP, compared to 8.4% last time out. This is driven by the increased cost of oil which in Q3 was still trading around USD125.00 per barrel. Obviously the plummeting price of Oil points to a lower deficit in the future. The biggest component of the deficit is still the interest bill on the overseas debt run up by the Banks to fund the housing boom. ... [more] Japan Cuts Interest Rate To 0.1%, USD Strengthens Monday, 22 December, 2008 This weekend has seen a decline in the NZD and AUD against the USD as investors again become weary of risk on the back of falling equities due to a downgrade of GE corporate debt. GE was once the biggest company in the world, and as its debt becomes riskier then investors have become more nervous about the world in general. The US auto bailout is now going ahead, with a short term loan being extended giving the USD a further boost... [more] Money For Nothin’ Thursday, 18 December, 2008 After yesterdays unanimous cut in US interest rates (to effectively zero) almost every currency in the world gained against it, with the Kiwi and Aussie currently at 0.59 and 0.70. The Kiwi has done especially well, coming from a position of relative weakness. The Fed rate is now so low and expected to stay low, that they must “employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability”, with Quantitative easing being the main tool. ... [more] USD Cuts By 0.75%, Target Rate Now 0 - 0.25% Wednesday, 17 December, 2008 In a surprise move the US Federal Reserve slashed US rates to between zero and 0.25%. This move acknowledges that the market has been expecting rates to be cut to zero. Other measures announced include the purchase of mortgage-backed investments as well as longer dated US Government debt. ... [more] USD On The Ropes, Fed To Cut Tomorrow? Tuesday, 16 December, 2008 Overnight the Euro continued its stunning recent form, gaining another couple of cents to sit around 1.3675 against the USD, and near the mid 0.4050’s against the Kiwi which itself strengthen marginally against both the USD (near 0.5550) and the AUD (just shy of 0.83 as I write). The main cause of this has been the continued weakness in the USD, which further deteriorated after another round of poor economic data. Industrial production and exports fell as car markers slashed output while manufacturing also decreased.... [more] USD Weakness Continues, Auto’s May Get Rescue Package Monday, 15 December, 2008 Over the weekend the weakness in the US$ has continued, caused by the increased liquidity created by the quantitative easing that the Fed has undertaken, and the fall in LIBOR starting last Thursday night. There was also increased speculation on the US automotive industry bailout. On Friday afternoon it looked like it might not be passed, and the Kiwi duly fell. ... [more] Kiwi and Aussie Rise On US$ Weakness Friday, 12 December, 2008 Overnight saw a round of US$ weakness across the board. The Kiwi rose 1 cent to 0.5550 against the US$ while the Aussie added 2.5 cents to just under 0.68 this morning, leaving the cross just under 0.82. However we have seen the Kiwi grind higher against the AU$ during our trading day recently, so this may come back over the course of the day. ... [more] Dr Bollard “Everyone Needs to Play Their Part” Thursday, 11 December, 2008 Yesterday afternoon the RBNZ Governor Dr. Bollard told a business conference that firms need to play more of a part to get relief through to the consumer. Particularly, Dr. Bollard identified that falling prices in food and fuel had not fully found their way through to consumers, and warned banks against using recent rate cuts to boost profit margins rather than pass on the windfall in the form of lower mortgage rates. Average 6-month mortgage rates are sitting around 7% in New Zealand while the RBNZ has lent banks a further $400 million through the Term Auction facility yesterday morning at a rate of 4.70%. ... [more] Opportunity for Aussie Exporters Wednesday, 10 December, 2008 The US Stock market lost some of the recent gains overnight as news of profit downgrades from a few large US companies diverted some of the attention from Obama’s proposed fiscal stimulus plan Expectations are that a firm agreement on the US$15 billion bailout plan for US automakers will be reached later this week. With the Dow off around 1.5% this morning, the Kiwi has pulled back towards 0.54 against the US dollar while the Aussie currently sits back down around 0.66. On the Kiwi/Aussie cross, the Kiwi currently sits just above recent lows around 0.82 this morning, territory that looks attractive to those exporting to Australia given the +0.90 levels we were seeing only a little over a month ago. In other news, the Canadian Central Bank cut interest rates by a larger than expected 0.75% to 1.50% last night. ... [more] Obama Spending Sees Kiwi Up Tuesday, 9 December, 2008 Global stock markets continued to build on last week’s gains overnight as the positive developments in the bailout package for US automakers and further pledges of fiscal stimulus for the US gave investors fresh reason to flow back into stocks. Plans announced by President-elect Barak Obama over the weekend to launch an infrastructure spending plan estimated to cost up to US$500 billion triggered a rally in commodities (oil up 6%, copper up 9%) and infrastructure-related stocks, which then helped push the Dow Jones up as much as 3.50% overnight. Risk appetite saw Asian and UK Stocks join in on the gains as well with Japans Nikkei up over 5% and the UK’s FTSE climbing an impressive 6%. ... [more] Banks yet to pass rate cuts to Mortgages Monday, 8 December, 2008 With US employment data and a busy night in Stocks on Friday volatility was back for the currency markets. The Kiwi traded down over a cent during the Friday night session before rebounding back to close around the 0.5350 level and the Aussie lost 1.5 cents before rebounding back to close above 0.6460. US Stocks managed to shrug off poor employment data to finish up 3% and Oil sank below US$41 dollars per barrel (down 25% for the week). The political fanfare surrounding the bailout of US automakers is bound to have an influence on markets this week, especially as the fortunes of the Kiwi and Aussie stay tied to movements in stock markets. It is a given Detroit’s Big 3 will get government aid in some form, and the conditions of the bailout package is expected to be hammered out by congress sometime this week. ... [more] Europe Slashes Rates Further Friday, 5 December, 2008 Overnight the Bank of England has cut its interest by a full percentage point to 2%, and the European Central Bank has cut 0.75% off its rate, bringing it down to 2.5%. The BOE cut was as expected, but the market was only expecting 0.5% for the ECB. Both the Pound and the Euro dropped slightly against the US$ on the news. The rationale behind the UK move was that the domestic economic situation is falling at an increased rate with consumer and business spending declining rapidly. They have been able to cut by such a large amount as inflation pressure are falling away and that further measures were required to get back to a normal level of lending in the economy. The full minutes of the meeting will be available in two weeks. ... [more] RBNZ Slashes Rates 1.5% to 5.00%, sees big rebound in Growth Thursday, 4 December, 2008 The RBNZ has cut rates by 1.5%, from 6.5% down to 5.0%. In the accompanying statement Governor Bollard said that rates are now at an expansionary level, and that further small rate cuts may be warranted in the future. This rate cut should support domestic demand and that inflation will slow in the face of the deteriorating global situation. Bollard also comments that this cut should be passed on by the banks to consumers to stimulate the economy, and that “Banks should share some of the pain”. The RBNZ have also updated their GDP forecast, with growth predicted to surge back to 4.0% + in 2010. The NZD showed little reaction in the foreign exchange market, as 1.5% was expected. ... [more] RBA “RATES ARE NOW EXPANSIONARY” Wednesday, 3 December, 2008 Australia cut its interest rates by 1% yesterday to 4.25%, against market expectations of a 0.75% cut. They can do this as they expect inflation to moderate in 2009 as global commodity prices fall, allowing rates to move to a level where they provide a stimulus to the economy helping Australia to halt the slide into a recession where is would join the US, UK, Europe, Japan and NZ. The RBA anticipated that banks would pass this cut onto consumers in the form of lower lending rates, which so far appears to have happened with mortgage rates declining which should stimulate consumer spending. ... [more] Global Equity Drops, RBA To The Rescue? Tuesday, 2 December, 2008 After last weeks equity rally stocks in Asia fell, with the Nikkei closing down 115.05 points. Morimoto filed for bankruptcy (Japan’s second largest bankruptcy this year) and BHP Billiton fell in Australia, dragging the ASX down 1.4%. Europe was not any better, with the FTSE off 5.19% and the German DAX down almost 6%. As I write the Dow is down 4.5%. The main diver of these falls is further global recession fears and the tightening of credit to consumers, limiting their spending ability. None of this helped the Kiwi and Aussie which are around 0.5350 and 0.6450 respectively. ... [more] Market Poised For Big Week Of Rate Cuts Monday, 1 December, 2008 The big news over the weekend is the announcement that Australia’s government will support an AU$ 15.1 billion surplus package to the economy, with more support if required further down the line. The package will run for 5 years and is mainly in the form of government spending on health and education. It should create 133,000 new jobs over 5 years. ... [more] Global Slowdown Knocks NZ Confidence Friday, 28 November, 2008 The US Thanksgiving holiday overnight kept markets refreshingly quite. The Kiwi dollar held above 0.55 and the Aussie continued to grind up above 0.6550. Local trade balance data showed that our annual trade deficit continued to expand last month though not at such a severe clip as economists were expecting; export volumes were slightly larger than expected last month (NZ$3.8 billion vs the 3.4 expected) but still New Zealand has imported NZ$5.2 billion more than we have exported this year. ... [more] Kiwi Buoyant As Market Likes Latest Fed Plan Thursday, 27 November, 2008 Local currency markets held onto this week’s gains overnight- the Kiwi is sitting slightly up on 0.55 and the Aussie dollar is sitting just shy of 0.6500 against the US dollar. The Kiwi/Aussie cross climbed back to just under 0.8500 yesterday afternoon and global stock markets continued to ease up albeit cautiously with the Dow adding 2% this morning. Markets will soon start to brace themselves for a very big week of Central bank rate cuts next week; the RBA announce cuts next Tuesday, followed by the RBNZ on Thursday and finishing with both the BoE and the ECB on Thursday night. We will learn a lot.... [more] Too Many US Dollars? Wednesday, 26 November, 2008 The Big story overnight; Annual GDP in the States is estimated to fall by 0.50% for the 3rd quarter, in line with economists’ forecasts and the poorest performance from the US economy since 2001. Stocks in the US remain roughly flat this morning after yesterday posting the biggest 2-day rally since 1987, and the Kiwi and Aussie dollars held onto gains to trade around 0.5450 and 0.6500 against the US dollar this morning. The Pound gained 3 cents against the US$ in response to plans for the £20 billion in tax cuts and stimulus proposed by the Government yesterday. The Kiwi fell to 0.3550 against the Pound. ... [more] Good News for Home Owners Tuesday, 25 November, 2008 Stock markets around the world rallied last night as news that Citigroup, the world largest bank, will receive a bailout in the form of a US$20 billion cash injection and loan guarantees to the tune of US$300 billion. The government stepped in after Citigroup’s stock fell 60% last week, sparking concerns that investors and depositors may continue to withdraw funds from the troubled bank. Citi’s stock price recovered 70% last night adding a significant contribution to the equity rally that pushed European stocks up nearly 10% and built on Fridays rally in the States to add a further 3.00%. This proved bullish news for the currency market too, the Kiwi rallied 1.5 cents to 0.5450 and the Aussie perked up nearly 2 cents to around 0.6450 this morning. ... [more] More Stimulus and Fonterra in Perspective Monday, 24 November, 2008 Share markets staged a rebound on Friday as news came through the NY Fed Chairman Timothy Geithner is likely to be Treasury Secretary in the new Obama administration. Geithner is an extremely experienced and popular administrator who has been working on the credit crisis since it began nearly 18 months ago. This boost to sentiment flowed through to the currency markets and has seen the Kiwi trade back up a 1.5 cent from the low 0.5200 area on Friday morning to open today around the 0.5350 level. It was a similar story for the Aussie dollar vs the USD which opened around 0.6100 on Friday before trading erratically up for a close 2 cents higher at 0.6300. ... [more] Kiwi Follows US Equities Friday, 21 November, 2008 Yesterday saw a bad day for global stocks, with the ASX, Dow, S&P and FTSE all down. Over the last few months the NZD has taken its lead from the Dow, falling as stocks tumble. This did nothing to help the Kiwi and Aussie, which fell to around 0.53 and 0.62 respectively. The Dow had another poor session overnight and is currently sitting down 1%, despite an agreement over the US car industry being agreed in principle. This was offset by another round of poor employment data from the US, as jobless claims approached a 26 year high. In addition the US leading economic indicators index signaled that the US is driving head first into recession. In a surprise move the Swiss national bank cut its interest rates by 1% in an unscheduled meeting, citing the worsening international financial outlook.... [more] Car Deal Makes Sense Thursday, 20 November, 2008 After the last few months of turmoil we seem to be returning to some sense of rational trading. Yesterday the New Zealand input and output prices were released, with input prices rising 3.7% for Q3, 13.6% for the year. The main drivers behind this were milk and oil prices. Output prices also rose, by 2.8% for Q3 and 9.8% for the year. While these seem to be high, Q3 ended in September and reflect the higher commodity prices of the time. Since then both oil and milk have fallen, partly offset by the fall in the Kiwi. Elsewhere the RBNZ placed NZ$1.5 billion into the banking system through its weekly Term Auction Facility (TAF). Banks bid a total of NZ$2.38 billion. The TAF allows banks to offer residential mortgaged backed debt (amongst other things) in exchange for funding, which will free up capital for lending and take some pressure off the banks who are struggling to replace their overseas borrowing. ... [more] Fonterra Warn Payouts to Sour Wednesday, 19 November, 2008 Overnight the Kiwi and Aussie have both become slightly weaker, with the Kiwi sitting just below 0.55, and the Aussie below 0.65. The Aussie has bounced when it has hit around 0.6350, as the RBA has stepped in to buy the currency at that level. Both fell on the fall in global equities, with the ASX and Dow both down. The Kiwi is also under pressure from the fall in diary prices, forcing Fonterra to admit they may have to cut milk payments to farmers, putting downward pressure on the economy. Current speculation puts this payout around NZ$6, down from around $7. However historically this is still a good level of payout and is being at least partially offset by the fall in the currency. The wet spring may also increase farm production, meaning that the total received by farmers remains constant, but the make up of it is skewed. ... [more] Japan Joins The Recession Club Tuesday, 18 November, 2008 Overnight we have seen a small rise in the Kiwi, with “only” a 2 cent range in the past 24 hours. A similar story applies to the Aussie, leaving the cross around 0.85 which looks to be good value with RBA and RBNZ meetings due in two weeks time, and with the RBA minutes from the last meeting due today, which should give some guidance as to future cutting measures. The market is expecting the RBNZ to cut 1%, based on global pressures, despite the fact that monetary policy should be all about the domestic economy. So if the RBNZ cut less than the RBA (entirely possible given the domestic focus of the RBNZ) there is upside in the cross. ... [more] NZ Dollar Looking Cheap Monday, 17 November, 2008 If you’re scratching your head wondering which way to turn in these markets, you are not alone. On Thursday the US stock market traded down 4.5% before snapping back in the final hours of trading to finish up an incredible 6% - that’s a swing of over 10% on a single day! The astonishing performance in US stocks spurred rallies in other markets, which continued through to Friday in the States when US retail sales data put a sizable dent in the bullish mood. Sales in the states fell 2.8% in October, the largest drops yet recorded and significantly larger than the 2.1% contraction markets were expecting. ... [more] Markets Bounce and NZ Housing Stands Strong Friday, 14 November, 2008 Markets continued to be exceptionally volatile overnight as risk aversion swept through markets forcing further sale of assets before reversing again this morning. The US Dow Jones fell as much as 4.5% in overnight trading only to scream back to close over 3.00% up this morning and oil rebounded 6.00% off the lows to US$58 per barrel. The Kiwi was pushed down below 0.5550 last night before climbing back over 1 cent to 0.5650 early this morning, and the Aussie briefly sank as low as 0.6350 before bouncing nearly 2 cents toward 0.655 in recent trading. Early rumors have begun to circulate that the RBA once again intervened in the currency markets yesterday morning.... [more] Risk Aversion Rules the Markets Thursday, 13 November, 2008 More of the same asset unwind process continued overnight; concerns over the outlook for the US economy, most notably the outlook for US consumer demand, caused companies to downgrade earnings forecasts and investors to steer clear of risky assets for yet another session. Some encouraging news though, US Treasury Secretary Hank Paulson, the man at the helm of the US$700 billion bailout cash, last night put forward a proposal to provide funds for the troubled American Auto industry to the tune of US$25 billion, and also use funds to increase the availability of consumer loans which have basically ceased to exist as banks would rather hoard cash than extend new loans to customers.... [more] Risk Aversion Sees Kiwi Down Wednesday, 12 November, 2008 The Kiwi and Aussie dollars continued to be pressed down overnight as persistent concerns over the health of the American economy perpetuated selling in world equity markets and led cash to flow back into American dollars. The recent bout of selling was again led by financial stocks and raw material producers. American car giant General Motors continued to make headlines for all the wrong reasons as it share price fell to US$2.90 - lows not seen since 1942. Australia’s ASX 200 stock index finished down 3.6% yesterday, Japans Nikkei 225 fell 3% and the US Dow Jones is also down 3% at time of writing. In currencies, both the Kiwi and Aussie slid 1.5 cents to 0.5725 and 0.6550 respectively and the Kiwi/Aussie cross edged back up to just above 0.8700 this morning. ... [more] Kiwi Smashed Overnight, China To The Rescue? Tuesday, 11 November, 2008 The big news in the markets this week is the announcement from China of a stimulus package, estimated at 4 trillion Yuan (about US$586 billion), to be spent over the next two years. The program is designed to focus on ten major areas, such as low-income housing, rural infrastructure, water, electricity, transportation, the environment, technological innovation and rebuilding from several disasters. The package represents nearly 14% of Chinas annual GDP and around 1% of world GDP and approached the US$700 billion needed to bail out the States a few months back. Stimulus is now required as the growth rate of Chinese GDP pulled back to a still enviable 9% in the September quarter, but down from 12% in 2007 and its lowest level since 2003, after the credit crisis put an end to the Western consumer debt bonanza leading the nations export market to suffer. ... [more] US Unemployment hits 14 year High Monday, 10 November, 2008 New Zealand voted in a new Government on Saturday electing John Key and the National Party to lead the country. Combined with the ACT party and United Future, John Key has a clear majority which should enable them to take positive action quickly to help limit the impact of the global financial situation. They plan to pass into law extra tax cuts starting on 1 April next year as well as extra support for those made redundant in the current slowdown. These measures, combined with a significant boost to infrastructure spending, should inject approximately NZD 1.5 bil short term, and a total of around 5.0 bill in the medium to longer term. In other news for New Zealand, quasi-government agency Quotable Value last night released data showing that the annual rate of property decline was 6.8% for October, and up from last month’s 5.8% decline. Values fell 8.4% in Auckland City, 9.0% in Hamilton, and 4.6% in Wellington. ... [more] Bank of England Slashes Rates by -1.50% Friday, 7 November, 2008 In a very surprising move the Bank of England has cut rates by 1.5% from 4.50% to 3.00%, with the market expecting just a -0.5% reduction. The ECB has kept to market expectations with a 0.5% cut down to 3.25%. In normal times the larger than expected cut would have brought the Pound down, however it has remained buoyant as investors are given hope that the UK will recover faster than expected, despite the Bank commenting that “There has been a very marked deterioration in the outlook for economic activity at home and abroad. Moreover, commodity prices have fallen sharply.” They also downplay inflation, saying energy prices dropping should pull inflation down with them.... [more] Obama Wins US Election, BOE and ECB Rate Announcement Tonight Thursday, 6 November, 2008 Last night saw the US elect Barack Obama as the 44th President. However the expected rally in US stocks failed to materialise, with the Dow dropping around 2% on concerns that the new President won’t be able to stop the US economy slowing further (Obama does not actually take control until Jan 20th). The Dow and S&P should provide a good barometer of how the market thinks the new President is doing. US employment data also showed that 157,000 jobs were lost in the last month (more than expected), with US non-farm payroll employment data out tomorrow evening. ... [more] Australia Slashes Interest rates Again, Markets like Obama Wednesday, 5 November, 2008 In a surprise move the Reserve Bank of Australia slashed another -0.75% off the official cash rate yesterday, bringing the rate down to 5.25%. They have now dropped the rate -2.00% in just two months and would appear ready to move further next month. Their concern has moved from global events to a domestic slowdown and they are desperately trying to get interest rates down to ease the pressure on households. Their job is made easier by the fact that most mortgages in Australia are based on the floating rate, so there is instant feed through to households. ... [more] Kiwi Rises As RBA Prepare To Cut Tuesday, 4 November, 2008 Overnight we have seen a recovery in the Kiwi and Aussie with the Kiwi breaking above 0.59 and is sitting just below the mid 0.59’s as I write. The Aussie hasn’t had quite the same push, and is in the mid 0.67’s. It may have been held back on the RBA meeting today where they are expected to cut rates 0.5%. The rise in both currencies has been partly caused by the rise in Global Stock markets, including the ASX. As the world seems more positive, then investors are happy to get back into higher yielding currencies. ... [more] Japan Lowers Interest Rates to just 0.30%! Monday, 3 November, 2008 The Bank of Japan lowered its key interest rate on Friday afternoon by 0.2%, from 0.5% to 0.3%, less than the 0.25% expected. Japan has spent the last five years trying to get its interest rates back to more normal levels but the global credit crunch has forced it to start to backtrack on these efforts. A plummeting Japanese stock market and a rising Yen are all adding real pressure onto the Japanese economy. There is every likelihood that Japanese interest rates will be reduced to zero again over the next six months... [more] Kiwi and Aussie Power On Friday, 31 October, 2008 What a week in the currency markets! After the Kiwi and Aussie dollars dived against the US dollar last Friday, falling around 7-8 cents apiece to 0.54 and 0.60 respectively, we are one Friday on and both currencies have now returned back to where it all began. The Kiwi climbed 2.5 cents on Tuesday, 2 cents on Wednesday, and finally another 1 cent last night to start this morning around 0.5950 - quite an impressive feat for a currency that cut interest rates by a full 1.00% last Thursday! The Aussie is currently trading around 0.68 against the US dollar and 0.87 on the Kiwi/Aussie cross.... [more] Fed Cuts 0.5%; Downside Risks to Growth Remain Thursday, 30 October, 2008 The Fed has cut 0.5% from the US interest rates, as expected, bringing the official rate down to 1%. The statement highlights that the pace of activity in the real economy has “slowed markedly, owing importantly to a decline in consumer expenditures”. Industrial production has also fallen off, and the Fed is concerned that events abroad are harming the US export market. However they noted that the fall in commodity prices (which has been damaging for the Aussie recently) has helped to moderate inflation pressures, which gave them the scope to cut, and should allow them to take further action if necessary. ... [more] RBA Intervenes Again, Aussie Rises Wednesday, 29 October, 2008 The RBA confirmed that it again intervened in currency markets yesterday, in order to buy more AU$, and thus provide support to their currency. History tells us that this may not be their last intervention in this period. The Aussie is currently around 0.64, having had a jump up this morning. The Kiwi was taken along for the ride, and sits around the mid 0.5650’s. The Yen fell as stocks rebounded, giving investor’s confidence and tempting them back into the carry trade, which helped the Aussie further. ... [more] RBA Intervenes, ECB to Cut Next Week? Tuesday, 28 October, 2008 The selling pressure we have seen on the NZD and AUD continued through Friday night and to a lesser degree last night. Ongoing unwind of the “carry” trade has seen both he NZD and AUD fall further vs both the Yen and the USD. Against this backdrop we have seen the Reserve Bank of Australia (RBA) intervene in the currency market on Friday and again yesterday, buying AUD around the 0.6050 level vs the USD as commodity prices slumped and investors exited the carry trade. This has stabilized the AUD and restores some confidence to the currency. ... [more] Kiwi Holds After Cut Friday, 24 October, 2008 Yesterday the RBNZ cut interest rates by an unprecedented 1.00% to 6.50% and signaled that “should the outlook for inflation evolve as projected we would expect to lower the OCR further” – the market is expecting rates to fall to between 5.5% and 4.5% by the middle of next year. This is, of course, dependant on the view that Central Banks around the world will all be cutting their interest rates over the coming months in response to the same factors that paved the way for the RBNZ’s cut yesterday; inflation is easing off the back of sharp falls in commodities, credit markets still remain stubbornly despite recent falls in Libor and the global growth outlook is deteriorating... [more] Inflation Yesterday, Migration Today, Bank Cuts Tomorrow Wednesday, 22 October, 2008 Yesterday saw NZ Q3 inflation come in bang on market expectations with a yearly figure of 5.1% and a quarter figure of 1.5%. The main drives of this were higher petrol prices and food. This will hopefully prove to be the high water mark, as the commodity bubble is deflating, and with it so should price pressures, with inflation falling back to target by the latter part of 2009. However it is still above the RBNZ’s target rate of 1-3% but should fall fast meaning that the door for rate cuts is firmly open - the market pricing in between 0.75 and 1% to be cut tomorrow. ... [more] How Big will the RBNZ go on Thursday? Tuesday, 21 October, 2008 It is New Zealand interest rates week! How big will the cut be? Well, the RBNZ cut 0.50% at the last meeting 6 weeks ago and told the markets that while 0.50% might have seemed large at the time, they had simply “brought forward some of the projected interest rate reduction, but have not altered the expected overall decline” – a total decline that would have seen interest rates in New Zealand fall to somewhere near 6.25% by mid 2009. But since then, the Europeans, British, Canadians and Americans cut 0.50% off their rates, and the Aussies have slashed a full 1.00%. ... [more] Peak inflation = Lower Interest Rates Monday, 20 October, 2008 This week sees NZ inflation released tomorrow, which is expected to show the same result as Q2 at 1.6% quarter on quarter, leaving us at 5.2% for the year. This shows that the RBNZ have got a handle on the situation and the economic slowdown has deceased price pressures. The fall in the price of oil has also contributed to this, and with the price continuing to fall through October we may see this trend continuing. This gives the RBNZ more scope to cut the interest rate, and therefore to relieve some of the pressure on the economy and housing market. ... [more] Price Of Oil Slumps Friday, 17 October, 2008 Last night saw the release of US inflation, which was unchanged at 2.5% after last month. This eases the pressure on the Fed to maintain price stability and thus opens the door to further rate cuts this month, with the market predicting another 0.5% cut. We also saw oil under US$70 last night, down from over US$147 in the last six months. ... [more] From Wall St. to Main St. Thursday, 16 October, 2008 Fed Chairman Ben Bernanke spoke last night, and the market listened. He pointed out that the continued turmoil in credit markets posed a “significant threat” to the US economy, and if that it may take some time for order to be restored in markets. In other words, the bail out plan is not suddenly going to make everything OK and we have to be patient as we go down the long road to recovery. He also indicated that the Fed may cut rates again, pointing to the diminishing risk of inflation. ... [more] Markets Take Comfort In Rally Wednesday, 15 October, 2008 There is a feeling that a sense of normality may be returning to the markets, with some sections of the media asking if the stock markets have now reached the bottom and could be on the way up. It is too soon to tell at the moment, as there is still a lot of dirty washing to be aired, but things seem to be more positive, with bank deposits guaranteed and cash from the Paulson plan finding its way into banks. They are now being urged to pass that cash onto investors and business, so it’s benefits are passed into the “real” economy. ... [more] Return to Confidence Tuesday, 14 October, 2008 This morning has seen a return to confidence in the market as stocks in the US and Europe climbed from their lows and the oil price rose. This is at least in part due to the guaranteeing of bank deposits and lending. The main surge in stocks was in financials, with Morgan Stanley rising 74%, and the S&P up 7.1%. The Dow experienced its biggest points increase ever, rising 559 points. With the US and Japan on holiday yesterday, Monday experienced very thin trading, causing rates to be erratic and jumpy during the New Zealand session.... [more] Global Moves To Guarantee Deposits Monday, 13 October, 2008 Over the weekend the RBNZ has released the details of its deposit guarantee scheme for NZ banks and deposit takers, including finance companies. "The purpose of the scheme is to assure New Zealand depositors that they can be assured their deposits are quite safe and the New Zealand financial system is sound," said Reserve Bank Governor Dr Alan Bollard. This joins with Australia, the UK, US and Europe who have all guaranteed their bank deposits.... [more] No inter-meeting cut necessary for NZ Friday, 10 October, 2008 After most of the developed world cut their interest rates yesterday, speculation was mounting that NZ would follow suit. However this did not happen, and we remain at 7.5%. This is because the RBNZ has already been one of the most proactive and forward looking central banks, meaning that a rate cut is not currently necessary. Dr Bollard began cutting rates two meetings ago, and has so far cut 0.75% in a steady and organized fashion. They instead announced measures to improve liquidity in the local market. ... [more] WORLDWIDE RATE CUT OF 0.5% Thursday, 9 October, 2008 Last night in a coordinated move the ECB, Fed, BOE, Bank of Canada, Swiss National Bank and Swedish Riksbank all cut 0.5% off their interest rates and released a joint statement, saying that inflation pressures are starting to ease but that “The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability”. ... [more] AUSSIES CUT 1% OFF RATES BY CRIKEY! Wednesday, 8 October, 2008 After an extraordinary amount of movement on Monday night, this morning the exchange rates look broadly similar to last nights close. The coordinated worldwide central bank response did not appear overnight, although the Fed has signaled that they may cut their interest rates further in light of poor economic data and a shifting of concern away from inflation and towards growth. Some economists think they may cut by up to 0.75%, which could provide a boost to the NZ$ and AU$. ... [more] AUD DOWN 8% ON USD Tuesday, 7 October, 2008 When we went home yesterday the NZD stood around 0.66. As I write it is 0.62. The AUD opened around 0.77 and is now around 0.70. Essentially all of the major currencies have dropped against the US dollar, with the exception of JPY, as investors get out of the “carry” trade. The NZDAUD is currently around the 0.883 level. World stock markets fell heavily with the S&P down 5.9%, the DOW below 10,000 for the first time in 4 years, the UK FTSE down 7.9% and emerging markets dropping at least 10%. ... [more] Kiwi Bolts Up On Cross Monday, 6 October, 2008 The recent spate of destruction in the finance sector showed no signs of abating over the weekend as the extremely tight interbank funding market begin to garner dark clouds over Europe and the UK. What is making analysing the situation particularly difficult is trying to gauge the fall out these events will have on future growth in the effected regions – will the cost of the bailout fall too heavily on consumers? How much of the artificially high interest rates will be passed on and to who, where? What will the impact of the bailouts be on future fiscal policy? ... [more] World Waits For US Bail Out Vote Friday, 3 October, 2008 Since yesterday morning the world has changed, perhaps fundamentally so. Yesterday afternoon the US Senate passed the revised bailout plan (from 3 pages long to 451 pages….), by a vote of 74 to 25. The bill can now proceed to the House of Representatives, where it will be discussed, and possibly approved, on Friday afternoon US time (our Saturday morning). But keep in mind it was rejected here last time out, so nothing is 100% guaranteed. The USD rose on the news and continued to rise as the cost of borrowing USD hit an all time high over night. ... [more] Key Decision Day For Global Economy Thursday, 2 October, 2008 With no new bank demises to report on it makes a nice change to wake up and find that the same institutions are still there in the morning. With a revised US rescue package going to the vote mid day today (NZDT) there is a sense of the market holding its breath and waiting to see what happens. The markets have been more optimistic that it will be passed, with several revisions including higher deposit insurance and tax breaks that mount up to US$149 billion over the next 10 years. ... [more] Is Europe the Biggest Problem? Wednesday, 1 October, 2008 Another very busy night in the markets. US stocks regained over half of Mondays 8.8% decline on the S&P 500 on speculation that the bailout plan, previously rejected by congress will likely go through with some cosmetic, constituent-pleasing tweaks before being presented to the House once again. In Europe, following on from Monday’s bailout of Belgium-based Fortis bank, the French and Belgium governments were forced to step in to rescue Dexia Bank, the world’s largest lender to local governments. ... [more] BAILOUT PLAN REJECTED - KIWI DOWN Tuesday, 30 September, 2008 The US$700 billion bailout package intended to restart interbank lending, restore confidence on Wall St and curb the growing number of housing foreclosures in the United States has been rejected in the US Congress by a vote of 228-205. Wow. ... [more] Another US Bank Belly Up Monday, 29 September, 2008 It looks like American bank Washington Mutual (nickname WaMu) has earned the unsavory title of being the largest US Bank failure in history on Friday as the now largest US Bank by deposits, JPMorgan Chase, also the owner of Bear Stearns, swallows up yet another failed institution. WaMu’s credit rating was slashed last week after heavy withdrawals from its depositor base cast serious shadows over its ability to fund its assets. The list of casualties may continue to grow this week as Belgium’s Fortis Bank may now face “nationalization”.... [more] Confirmation day for the New Zealand Economy Friday, 26 September, 2008 Last night the US Congress approved “a set of principles” for the proposed US$700 billion bailout of the financial system, ending a week of uncertainty and giving US and European stocks a welcome boost. The finer points of the deal are still to be hammered out, but the Treasury should have $250 billion available for immediate use, with the rest to follow once the bill has been passed. In an unusual step the US Presidential candidates issued a joint statement, calling for “a bipartisan agreement”.... [more] A Nation of Optimists! Thursday, 25 September, 2008 We are once again a nation of optimists! The Westpac consumer confidence survey release yesterday afternoon rose to 105 in the current quarter, up from a 17-year low of 82 in the second quarter. The index measures the number of optimists minus the number of pessimists. Confidence is rising off the back of 0.75%’s worth of interest rates cuts, easing commodity prices improving the economic outlook, and the promise of a tax cut just around the corner. ... [more] Kiwi Consolidates Before Local Data Wednesday, 24 September, 2008 The rebound of the Kiwi and Aussie dollars faltered last night as the proposed bailout package came to its first congressional stumbling block; democrats are trying to tack on legislation around executive pay and home-owner protection while Republicans balk at the plans reach and size. The plan is still likely to pass largely unchanged, albeit sporting a few minor add-ons; this is America’s election year after all, and there are opinion polls to think of. In general, a Japanese public holiday helped keep the markets relatively muted (compared to the noise recently). ... [more] US Dollar Under Pressure Tuesday, 23 September, 2008 The US dollar came under pressure last night as concern over the impact the bailout plan will have on the budget deficits and future growth weighed heavily on the Greenback. The gargantuan US$700 billion bailout plan currently being put before congress saddles the US taxpayer and economy with even more debt on top of the significant leverage already held by the government and households. Markets are now predicting that the strains this will put on the broader economy will lead the Fed to cut interest rates from the current 2.00% at the October announcement.... [more] Must Read - Kiwi and Aussie Sky Rocket. Monday, 22 September, 2008 Well folks, there you have it – we were looking for the Kiwi and Aussie dollars to bounce and what a bounce it was! The Samaritans at the US Fed and Treasury were at it again on Friday night, adding to the US$450 billion plus they have doled out already this week in the form of bailout packages, liquidity injections and even providing loans for takeover activity. Amazing. The latest news is that the US Treasury will set up a financial rescue plan (to the tune of US$800 billion) that would basically act to purchase mortgage-related debt. ... [more] Kiwi the Top Performer Friday, 19 September, 2008 Last night the US Fed, the European Central Bank, the Japanese Central Bank and the Bank of England pumped a total of US$250 billion into financial markets in an effort to restore rational short term lending to the inter-bank market and restore lost confidence in the sector. The US Fed and the Bank of England also imposed a moratorium on short selling in financial stocks to curb the aggressive selling that has caused wreck and ruin in the US stock market this week. Stocks in banks such as Wachovia doubled this morning as investors, who had been short selling stocks rushed to buy back sold positions, and those who had sat out of the recent turmoil were encouraged back into the market. The US stock markets bounded up on the news seeing the Dow Jones rise up 4.30% and climbing in the period following the announcement. ... [more] Turmoil Takes Toll on Aussie Thursday, 18 September, 2008 Last nights attempts by the US Fed to alleviate the turmoil in the financial markets was to no avail as US stocks suffered another wave of selling pressure, again centered in the financial sector. The Fed agreed to bailout America’s largest insurance provider, AIG, to the tune of US$84 billion while Lehman’s, who filled for bankruptcy earlier this week after failing to find a buyer, managed to partly sell themselves to the UK’s Barclays for the paltry sum of US$1.5 billion. Commodity prices were the benefactor of the cash dash out of US financial stocks last night. Oil picked up US$6 to US$97, but the real move happened in gold, which climbed an obscene US$80 (nearly 11%) to US$866 and counting as investors seek shelter from the storm. ... [more] FED RATES ON HOLD; KIWI BOUNCES Wednesday, 17 September, 2008 At 06:15 this morning the US Federal Reserve kept US interest rates on hold at 2.00%. Over the course of the evening, the London Inter-Bank Offer rate, the effective interest rates at which banks around the world lend to one another over night, more than doubled (from 3 to 6%) as Banks horde cash, afraid to lend to one another in case the counterparty becomes the next headline in the Wall Street obituary. In lieu of cutting the interest rate, the Fed injected US$140 billion of funds into the finance system and has widened the type and source of the assets that it will accept to collateralise loan of cash and Treasuries. ... [more] Lehman’s Rock Markets, Fed May Cut Tomorrow Tuesday, 16 September, 2008 The US stock markets tumbled overnight as the US Federal Reserve failed to broker a deal for the takeover of Lehman Brothers leaving the 158-year-old investment bank no choice but to file for bankruptcy. In response to the collapse, the markets are now pricing in a near 90% chance that the US Fed will make a quarter point interest rate cut to 1.75% at 6.15 tomorrow morning. Both the Dow Jones industrial average and the S&P 500 were down between 3.5 and 4% at time of writing. Following the collapse of Bear Stearns and now Lehman Brothers, and with Bank of America accepting an offer to take over Merrill Lynch yesterday, all of the old guard brokerage firms are now gone from Wall St.... [more] Another US bankruptcy? Monday, 15 September, 2008 US investment Bank Lehman Brothers looks set for Bankruptcy today as potential suitors Barclays and Bank of America pulled out of talks to take over the 158 year-old Wall street stalwart late last night. Lehman’s has suffered heavy losses related to the sub prime crisis and continues to be plagued with cash shortages, loss of confidence from the other trading banks and speculative attacks on its stock price, which on Friday was down 94% this year. As the fate of the bank is still unclear, this will bring extreme amounts of volatility to the markets until the situation is resolved.... [more] RBNZ spooked by NZ growth outlook Friday, 12 September, 2008 Yesterday morning the RBNZ cut domestic interest rates by half a percent to 7.50% against the 0.25% cut expected. In the accompanying report, RBNZ Governor Dr. Bollard described at length the concern that high interest rates and future contractions in the housing market may exacerbate the already dour outlook domestic growth. The RBNZ has been concerned about the rise of the property bubble for a while now (yes, it was a bubble by the RBNZ’s own omission) and so had driven rates very hard in effort to slow the housing Juggernaut. The RBNZ has now had to move quickly to bring down the average mortgage rate so that the housing market doesn’t nosedive, business investment doesn’t dry up, and the domestic growth is not extinguished.... [more] RBNZ CUT RATES BY 0.50% TO 7.50% Thursday, 11 September, 2008 The Reserve Bank of New Zealand cut domestic interest rates by 0.50% to 7.50% at 9:00am this morning, the market was expecting a 0.25% cut. In the accompanying statement, the RBNZ said “the New Zealand economy is experiencing a marked slowdown, led primarily by the household sector. The outlook for the global economy has deteriorated further in the wake of continued financial market turmoil.” In deciding to cut by 0.50% today, the RBNZ said that they have “brought forward some of the projected interest rate reduction, but have not altered the expected overall decline”... [more] RBNZ at 9:00am tomorrow Wednesday, 10 September, 2008 Overnight was the first excitement in more than two weeks on the Kiwi Aussie cross which saw the Kiwi power up 1 cent to above 0.83 against the battered and bruised Aussie dollar - it hasn’t been up here since early May this year. Against the greenback, the Kiwi again trod a wide 2 cent range around 0.67 while a poor performance from oil (down US$4 to US$102.8) and gold (down US$20/2.90% to US$780 per oz) led the Aussie dollar back toward the mid-0.80 lows hit earlier in the week. With the Kiwi up so strongly against the Aussie last night, and with commodity prices around the world looking like they will continue to sour, this will no doubt provide some comfort and opportunity to those Kiwi businesses importing from Australia.... [more] Fannie/Freddie shake things up Tuesday, 9 September, 2008 With the northern markets trading on the Fannie Mae/Freddie Mac bailout for the first time since the Sunday evening announcement, there was massive volatility in the currency markets, mainly as traders repositioned themselves back into US dollars. With the uncertainty surrounding the bailout lifted from investors, risky assets fell back into investor’s sights. Stock markets around the world rallied through the Monday session, but the high yielding Kiwi and Aussie dollars were unable to hold onto any gains in the face of bold US dollar strength.... [more] US Treasury to the rescue Monday, 8 September, 2008 The US government stepped in over the weekend to take control of crippled mortgage lenders Fannie Mae and Freddie Mac which together account for nearly half of all outstanding home loans in the US. One of the many conditions of the bailout is that Fannie and Freddie will effectively be wound down by 10% per year until a relatively paltry US$250 billion remains on the books. The future of Freddie and Fannie has been eagerly awaited by the markets and it will be very interesting to see if the proposed package lives up to investor’s expectations. Other news from the States, US non-farm payrolls data showed that America lost 84k jobs in August, which led the unemployment rate up to a five-year high of 6.1%. Expectations were for a 75k decrease.... [more] Collateral; Fed tacks, ECB jives. Friday, 5 September, 2008 The Aussie trade data released yesterday came out at an AU$717 million deficit for the month of July, a stark difference from the AU$50M surplus expected and well down on the revised AU$351 million surplus from June. It seems that the commodity boom, supposedly the saving grace of the Australian economy, may have turned out to be a bit of a double edged sword as the cost of imported fuel drove a 4% increase in total imports for July. This outweighed the 1% increase in exports and sent the monthly trade balance back into deficit territory. It seems that the market has underestimated Australia’s fuel import requirements... [more] Slaphappy selling doesn’t stick Thursday, 4 September, 2008 After the threat of Hurricane Gustav passed, oil markets shed US$7 to US$110 by yesterday morning, and with oil down, the commodity tracking Kiwi and Aussie came under pressure as well. Slaphappy selling pressure in the afternoon saw both currencies down at least a cent by the end of the NZ business day. As oil managed to hold at US$110 last night, the Kiwi and Aussie dollars were able to claw back yesterday’s losses to this morning trade around 0.6850 and 0.8350 respectively.... [more] Gustav batters markets Wednesday, 3 September, 2008 Hurricane Gustav has left a trail of destruction through oil markets as the downgrade to a category 2 storm means oil production will resume almost unobstructed in the Gulf states. At one time oil plunged US$10 to just above US$105 per barrel before recovering to around US$110 as investors who had bought oil hoping for a spike in the price had to quickly dump investments when Gustav ran out of puff. With oil getting slammed it was only natural that the commodity following Kiwi and Aussie got knocked as well. After holding at 0.85 after yesterday afternoon’s RBA interest rate cut, the Aussie dollar had lost a further 2 cents by midnight before it recovered to just under 0.84 this morning. The Kiwi suffered much the same fate ending this morning above 0.6850. As can be seen in the graph below, the Aussie dollar has already been very heavily sold after the change in the Aussie rates outlook wiped 10 cents off the Aussie.... [more] Today’s the Day – Aussie Rates Tuesday, 2 September, 2008 So, what is the RBA going to do this afternoon? Consumers and business are crying out for a half a percentage cut, and the Aussie dollar is pricing in something between 0.25 and 0.50%, What we could well see is a 0.25% cut with the promise of a further 0.25% at the next meeting to satisfy current expectations of half a percent. Due to the uncertainly surrounding the decision we are likely to see a fair amount of excitement in the market around 4.30 this afternoon.... [more] Eye on Australia Monday, 1 September, 2008 What a week this will be. Interest rate announcement are due out from the Reserve Bank of Australia (tomorrow), the Bank of England and the European Central Bank (both Thursday night). On top of this is Aussie GDP on Wednesday and US non-farm payrolls on Friday evening. Also on the radar is the growing threat that Russia may interrupt oil supplies to Europe in response to proposed European and NATO sanctions resulting from the invasion of Georgia.... [more] Made in the USA Friday, 29 August, 2008 It was a relatively quiet night in the currency markets, the pound broke down to new lows against the US dollar (around 1.83) after the Nationwide House price survey showed that the average house price has falls of 10.5% over the last year. The next big driver for the Antipodean currencies will be the RBA interest rate announcement next Tuesday and Aussie GDP on Wednesday.... [more] Confidence is Key Thursday, 28 August, 2008 Spring is in the air. The August NBNZ business confidence survey released yesterday showed a net 21% of New Zealand businesses expect conditions to worsen over the next year, a vast improvement from the 43% of pessimists in the month before. The real key to the data is that a net 4% of the businesses surveyed expect their firm’s own activity to improve over the next year, up from -8% the previous month and the first positive figure in 6 months. As can be seen from the graph below, firms own activity outlook has proven to be an accurate barometer of growth, a relationship recognized by the RBNZ. So why the change of heart?... [more] Early birds buying US houses Wednesday, 27 August, 2008 The Kiwi and Aussie dollars were again on the back foot yesterday after the NZ trade data delivered a larger that expected, import heavy deficit. On top of this, giving the US dollar a boost was news that the speed of US home price declines eased for a fourth month. Minutes from the last US Fed interest rate meeting (left on hold at 2.00%) were released at 6.00 this morning and said “the next move would likely be a tightening (but) the timing and extent of any change in policy stance would depend on evolving economic and financial developments”. As expected, it’s not a question of if, but when.... [more] Busy day for local data Tuesday, 26 August, 2008 Currencies gave up a little ground to the US dollar overnight as news out from the US showed that the sales volume of existing homes picked up in July. The Aussie was pushed back towards 0.8630 while the Kiwi takes the prize for worst performing currency overnight as it fell a bit over half a cent to 0.7050. The one to watch in the currency markets is the pound that pushed to a low of 1.84 against the US dollar before rebounding back to where it began at 1.85, all while the Brits were on a Bank holiday.... [more] Markets rollercoaster not over yet Monday, 25 August, 2008 In a very choppy Friday session, commodity and currency markets gave up the gains made last Thursday. Against the US dollar, the Aussie dropped 1.5 cents to 0.8650 as did the Kiwi which fell to 0.7050. In commodity markets, oil fell US$7 (6%) to US$115 per barrel and Gold shed US$15 (2%) to US$823 per oz. The million-dollar question this week is will the US dollar strength continue? Over the last few weeks we have seen a huge amount of movement as traders swung back in favour of the US dollar. More wide, unpredictable ranges can be expected for the next few days as bargain hunters square off with traders still trying to rid portfolios of losing positions.... [more] Rebound! Friday, 22 August, 2008 The CRB Index (a basket of commodities used to index commodities as a group) shot up 3.3% last night as sentiment that the recent bout of US dollar strength may have been slightly overcooked caused investors to plow cash back into the commodity bets. Gains in the Index were lead by oil up 5% to US$121 per barrel and gold up 3% to US$836 per oz. In currencies against the US dollar; the Euro is up 1.5 cents to near 1.49, the Aussie is up 1 cent to 0.88 and the Kiwi climbed over half a cent to 0.72. The Kiwi/Aussie cross stayed firm around 0.82.... [more] Time to Open the Floodgates Thursday, 21 August, 2008 Without fresh data the markets were relatively somber over night – quite a rare event given the hectic month to date. The Kiwi continued to hold off the US dollar above 0.71 and the Aussie is right where we left it yesterday afternoon above 0.87 after spending the night under some US dollar pressure. The Kiwi/Aussie cross eased slightly from yesterday’s highs near 0.82.... [more] RBA cuts tipped for September Wednesday, 20 August, 2008 The gains of the Kiwi over the Aussie on the cross have calmed in overnight trading with the Kiwi up a mild quarter of a cent on the cross after failing to do much with a break above 0.8200. Against the US dollar both currencies firmed with the Aussie just above 0.87 and the Kiwi through 0.71. The recent bout of US dollar strength that blew through the markets seems to run its course for the time being. The Australian dollar has been hurt particularly hard by this and may be due for a corrective rally – if you need some Aussie dollars in the near future, now might not be a bad time to buy them.... [more] Sound as the Pound? Tuesday, 19 August, 2008 Another great performance by the Kiwi against the Aussie dollar overnight as it climbed a further half cent to 0.8180. After an outstanding run, the US dollar has justifiably paused to catch its breath against the currencies that have been so heavily defeated by it over the past week. Against the US dollar, the Kiwi showed some potential by spending most of the night trading above 0.71 only to be pushed back to the top of yesterdays range at the close of the US day. The Aussie languished around the sub 0.87 mark vs the US$ and even the Euro managed to walk away from the session without losing any more ground below 1.47.... [more] Kiwi shines against the Aussie Monday, 18 August, 2008 The Kiwi/Aussie cross was the star of the show Friday night as the Kiwi powered up to 0.8150 following a positive spin on NZ retail sales earlier in the day. The Kiwi is up 5% against the Aussie dollar this month. Against the US dollar, the Aussie eased off half a cent over the course of Friday to close around 0.8650 while the Kiwi did just the opposite by climbing to just above 0.7050. Triggering strength for the Kiwi against the Aussie dollar was Friday mornings NZ retail sales data that pleasantly surprised markets with a 0.9% gain in June. 0.00% was expected.... [more] This is for the US Dollar Bulls Friday, 15 August, 2008 All things considered it was a relatively quite night in the markets; the Kiwi eased back to near 0.70 and the Aussie was down slightly to 0.8700 against the US dollar. Neither currency pushed down below lows made earlier this week. The Kiwi/Aussie cross eased marginally but remained firm above 0.8000. The US dollar gains carried on against the Euro, which was pushed down further to around the 1.48 level. Gold dropped US$20 (or 2.5%) to US$805 per oz but it was only losing some of the rebound gains it made after failing to crack 800 earlier in the week.... [more] Japanese snap up Kiwi on Sale Thursday, 14 August, 2008 The Kiwi and Aussie dollars just looked too cheap for the carry trade investors last night as both were bought back a massive 3 cents against the Yen after failing to make a break below 74.00 and 93.00 respectively. This translated into a 2-cent climb for the Kiwi against the greenback to 0.7050. With the interest rate advantage between the Kiwi and the Aussie now swung back in favor of New Zealand (for full coverage see yesterdays report), there was no doubt who the favorite was on the Kiwi/Aussie cross. Building on yesterday’s gains, the Kiwi broke back above 0.80 into levels not seen since 3 months back in early May... [more] Kiwi looking good on the cross Wednesday, 13 August, 2008 After a dip into the mid to low 0.69’s last night, the Kiwi dollar managed to finish back where it began, just shy of the 0.70 level against the US dollar. Not so much luck for the Aussie that made a decisive move down to 0.8750 against the US dollar. The real magic happened on the Kiwi/Aussie cross that pushed up towards the 0.80 level – that’s the highest the pair has been in just under two months. Oil continued looking soft, finishing down around US$113, and gold took a dive for the 800 line but failed all the way back to US$816 per oz. which, as per yesterdays graph, helped keep the buyers out of the Aussie overnight.... [more] Dollar strength sees 5% drop in Gold Tuesday, 12 August, 2008 Much of Friday’s trend continued over the Monday session seeing the US dollar strengthen against the major currencies and causing further selling in commodities. Against the US dollar, the Kiwi was pushed down below 0.70, the Aussie continued down in fresh lows to just above 0.88 and the Euro was again on the back foot, this time down to just above 1.49. The Kiwi/Aussie cross was unmoved just above 0.79. In other markets, oil was again sold seeing it down to US$113 while gold pulled out a US$40 shocker as it fell to US$820 – that’s a massive 5% drop in one night! Gold is considered the ultimate inflation hedge as investors traditionally add it to portfolios as a store of wealth as it will generally outperform other markets in a down turn. To see such a significant fall in gold is a sign that market attention is starting to move past the recent inflation and growth scares and that participants are beginning to regain confidence in the US economy.... [more] The US$ strikes back Monday, 11 August, 2008 The landscape of markets has seen a dramatic and fundamental change over the last few weeks, and on Friday, a bout of US dollar strength left all other currencies toppled in its wake. Against the US dollar, the Euro is down 3 cents to below 1.50, the Kiwi fell over a cent to below 0.7050, the Aussie copped a 2 cent beating to below 0.8900 and the Pound had a 1p loss to 1.92. Oil lost US$4 to US$115 per barrel.... [more] The Big picture Friday, 8 August, 2008 Last night saw the interest rate announcement from the Bank of England (BOE), which as expected, disappointed markets by failing to cut interest rates from 5.00%. The problem faced by the BOE is one we all recognize, inflation looks set to rise and growth looks set to fall. The problem is, inflation has not yet cleared 4% but still the BOE are petrified of it. House prices’ are through the floor, retail growth is a thing of the past and consumers are near drowning in personal debt, but strangely enough, the BOE just happens to consist of the only people in Britain who don’t seem to mind.... [more] Aussie continues to drop Thursday, 7 August, 2008 In currency markets overnight, the US dollar Juggernaut powered ahead against all it competitors which saw the Kiwi driven under 0.72, the Euro down close to 1.54, and the Aussie continued its masterful decent to trade just below 0.91 this morning. Oil stayed soft around US$118 per barrel and the Kiwi/Aussie cross eased back to around 0.79.... [more] Markets roiled in double whammy! Wednesday, 6 August, 2008 In currency markets last night the Aussie continued to get slammed, dropping 1.25 cents to 0.9150 against the US dollar in the 12 hours following yesterday’s RBA interest rate announcement. After hitting a high of 0.9850 as recently as mid-July, the Aussie has dropped over 7.5% against the US dollar. The Kiwi has already taken a big hit against the US dollar this year; it is down almost 10 cents from the highs of 0.8200 from March. It is encouraging to see that while the Aussie was heavily sold, the Kiwi has proved highly resilient holding its ground in the face of US dollar strength.... [more] Commodities slashed – RBA announcement at 4.30 Tuesday, 5 August, 2008 In currency markets last night, the Aussie dollars’ soft attempt at a rally during yesterdays Australian Bank holiday was made short work of during last nights commodity sell off. The Aussie was pushed back around 0.9300 ahead of the Reserve Bank of Australia’s interest rate announcement at 4.30 this afternoon. The Kiwi managed to hold onto more of yesterdays gains and is up around the 0.7300 level this morning. The Kiwi/Aussie cross built on yesterday’s gains as it climbed to 0.7850. Currencies most significant loser in last night’s commodity blitz was 1 cent loss in the Canadian dollar, which up until now had been trading within striking distance of 1 for 1 to the US dollar... [more] Aussie down over 5.5% from highs Monday, 4 August, 2008 After markets were so quick to punish last week’s US 1.9% second quarter GDP when it missed forecasts 0.4%, it is reassuring to see a positive reaction to good news. That good news came in the form of US non-farm payrolls data that showed the US jobs markets contracted by 51k in July vs the 71k decrease economists were expecting. Still with the sour taste of last Thursday’s Aussie retail sales, Aussie trade balance and disappointing Kiwi business confidence fresh in the mouths of investors, there are no prizes for guessing which way the money flowed.... [more] The Aussie Conundrum Friday, 1 August, 2008 There has been something for everyone since our last report – Aussie retail sales and trade balance data, then our NBNZ business confidence survey, then last but not least, US GDP. In overnight trading the Aussie dollar slid to just above 0.9400 before recovering to finish around 0.9420 against the US$. The Kiwi managed to fend off a simply abysmal business confidence survey to hold around mid-0.73 against the states, but more important was the long time coming climb back to 0.7800 against the Aussie.... [more] Bollards currency update Thursday, 31 July, 2008 The Kiwi and Aussie both shed a cent in overnight trading after comments made during a speech by RBNZ Governor Dr. Bollard. In an unusual move on Dr. Bollard’s part, he went beyond the usual drab banker-speak and directly addressed the currencies. He said “on a trade-weighted basis, the exchange rate remains at high levels, but there are big differences in the level of the dollar against particular currencies. We are at historical highs against the US dollar and the Japanese yen, but well below average against the Australian dollar – and almost exactly historically “normal” against the euro and the British pound”. What more can I say?... [more] Oil Falls further, Petrol to Follow? Wednesday, 30 July, 2008 The top story overnight was in oil which fell a further US$3 to US$122 per barrel, and at one time extended the drop as much as US$5 toward US$120 per barrel. As the price of oil and the US$ tend to move in the opposite direction, the greenback found no shortage of buyers overnight as it rose up against all the major currencies. With Oil falling and the Kiwi holding up relatively well, there looks to be scope for further falls in the price of petrol at the pump. The price of in oil in NZ dollar terms has fallen 14% that translates to a price at the pump of around $1.87. This should help ease headline inflation and ensure that interest rates can continue to be brought down in an orderly fashion.... [more] NZ Exporters closing the gap Tuesday, 29 July, 2008 In markets the Kiwi strengthened against both the US and Australian dollars to finish at 0.7450 and 0.7785 this morning. The Australian dollar remained steady against the US trading a little over 0.9550 this morning. ... [more] Some Good News out of the USA Monday, 28 July, 2008 Some good news out of the USA in the form of durable goods orders (orders for items intended to last several years), which rose 0.8% in June vs the -0.3% expected. On top of this was data that showed that annualised new home sales was 530k in June vs the 503k expected. The States have a large inventory of unsold houses that need to be cleared so normal supply and demand can resume in the housing market and the illiquid capital involved can be freed up. Increasing turnover is a sign that this is happening. Given the recent spate of positive news from the US, it seems that they are on the road to an economic recovery while the rest of the West are still tangled in the various symptoms of a downturn (see the NAB story covered in the next paragraph).... [more] After 5 years and 13 hikes – we have a cut Friday, 25 July, 2008 Yesterday the RBNZ cut interest rates 0.25% to 8.00% and will continue to do so in 0.25% intervals as long as inflation doesn’t go too far up or the Kiwi doesn’t go too far down. The idea is that the problem of inflation (forecast to hit 5% in September) will be solved organically, as a weak economy with its weak demand takes the pressure off prices. Although, with inflation still deliriously high, it may be have been a bit of a punt of the Reserve Banks behalf. If growth can’t dampen inflation as planned and the RBNZ knocks a few cuts off interest rates in the mean time, then rates will have to be left higher for longer to do to inflation then, what could be done now.... [more] RBNZ cuts rate to 8.00% Thursday, 24 July, 2008 The RBNZ cut interest rates 0.25% to 8.00% at 9.00am this morning on concerns that the “domestic economy will slow further” as “the ongoing correction in the housing market, together with the very high oil prices, will limit household spending and constrain the extent of recovery”. Regarding the threat of inflation, the RBNZ said that “recent oil and food price increases mean that annual CPI inflation should peak around 5 percent in the September quarter of this year. However, we expect that inflation will return inside the target band in the medium term.” Also, the RBNZ said that “provided that the outlook for inflation continues to improve and there is no excessive exchange rate depreciation, we would expect to lower the OCR further”.... [more] Yes, but how much later? Wednesday, 23 July, 2008 Oil kept up its losing streak overnight, wiping US$3 more off the price to finish the day around US$127 per barrel. In currencies, oil led the Aussie down over half a cent to trade around 0.9700 against the US dollar and pushed the Kiwi/Aussie cross back up to 0.7825. Aussie consumer inflation is to be released at 1.30 this afternoon; picks are currently for 4% annual. RBA Governor Glenn Stevens is staring down the barrel or that infamous western dilemma – rising inflation and slowing growth. With the Aussie softer overnight, and oil beginning to look like it is on shaky ground, a surprise in today’s data could see some volatility in the Aussie dollar.... [more] Will the Aussie strength last? Tuesday, 22 July, 2008 Though yesterdays Australian producer price index (PPI) came in below the 5.3% annual forecast at 4.7%, which should indicate to the market that the RBA is more likely to cut rates for its next move rather than raise them, strong buying saw the Australian dollar bid up against the greenback to 0.9750. With the Kiwi unable to follow the path of the Aussie, as it likely would have were it not for the RBNZ meeting, the pressure mounted on the cross rate and the Kiwi was drawn down to a few points below 0.7800 against the Aussie.... [more] Oil down 12% in one week Monday, 21 July, 2008 The major story over the weekend was the continuing fall in oil, which shaved a further US$3 from Thursday’s close to finish at US$128.50. While it is still too early to declare the bubble burst, oil has plummeted nearly 12%, or US$18, from the US$147 per barrel highs traded at as recently as Tuesday last week. In currencies, the Aussie managed to hold off dropping below 0.9700 against the US dollar while the Kiwi hung around the mid to low 0.7600 region. The Kiwi/Aussie cross remained steady around the mid to low 0.7800’s. Of course Thursday this week is a big day for the New Zealand dollar with the RBNZ interest rate announcement at 9.00 am. At the end of last week the markets were predicting the decision to be a 50/50 call.... [more] Oil Drops Further Friday, 18 July, 2008 Lending a second day of support to the US dollar was oil, which dropped another US$5 to US$129.50, and a second session of good performance from US financial stocks. This time stocks were led higher by an earnings announcement from JPMorgan Chase that came in well over analyst estimates and subsequently attracted cash to the sector. The Kiwi is currently down around 1 cent to 0.7600 while the Aussie, managing not to slip quite so far, pared back to just below 0.9700. On the Kiwi/Aussie cross, with the Kiwi giving up more ground the cross eased lower to around 0.7800.... [more] Oil 10% off the high Thursday, 17 July, 2008 After making a record one day drop of US$6 earlier in the week, oil last night continued to press down to briefly touch a low of US$132 per barrel – that’s a whopping US$14 range from the US$146.50 high earlier in the week. As global growth continues to slow and consumers are fast running out of money to spend, investors are questioning whether the demand, which has been aggressively priced in to a range of commodities, is as strong as it was cracked up to be. Of course this is bullish news for both the US dollar and the US stock market and helped boost the both of them in the overnight session.... [more] NZ Inflation hits 4.0%, Interest Rate Cut now 50/50 Call Wednesday, 16 July, 2008 The US dollar softness was spurred on overnight by Fed chairman Ben Bernanke who, in an address to the Senate Banking Committee, told officials that there are “significant downside risks to growth” and that “the upside risks to the inflation outlook have intensified”. This comes as the Fannie Mae/Freddie Mac bailout saga continues to wreck confidence and market stability in the States. In markets, the only major currency that couldn’t hold on to gains against the US$ was the EUR, which made it to 1.60 before shedding a cent upon the release of the worst German business confidence survey since 1992.... [more] Muted Reaction to US Mortgage Bail Out Plan Tuesday, 15 July, 2008 The US Dollar was slightly softer last night as the first draft of the Fannie Mae/Freddie Mac government bailout proposal was met with a mixed response by financial markets. The two mortgage providers, that lend nearly half of Americas US$12 trillion in outstanding home loans, have run into difficulty in the last two weeks with their share prices falling 50%, to be down 80% from their peaks. This has raised questions about their ability to raise new capital to shore up their balance sheets. Concerns about their levels of capital have pushed up the margin on the debt that they issue.... [more] US Mortgage Lenders too Big to Fail Monday, 14 July, 2008 The US dollar took a hit on Friday night as news emerged that government sponsored mortgage issuers Fannie Mae and Freddie Mac, the lending institutions behind almost half the US$12 trillion in outstanding US mortgages, are having difficulty finding investors to purchase their short term debt issues. After shares in the companies lost 45% of their value last week, the issuers have entered talks with the US Fed to potentially seek Fed funding for their short term funding requirements. As the lenders of nearly half the US mortgage markets, Fannie Mae and Freddie Mac are right at the top of the Feds “Cannot Fail” list, so it is very unlikely the two entities will be left out to dry.... [more] Aussie jobs recover May losses Friday, 11 July, 2008 Despite the recent setbacks to the Aussie economy from the business and consumer confidence earlier this week, much of the AU$ selling was swiftly reversed after some better than expected employment stats released yesterday. Aussie employers added 29,800 new jobs in June against the 10,000 expected, this sees the unemployment rates down 0.1 to 4.2%. The previous month’s decline of -19,000 was revised down to -25,000, so effectively the rise in June just offsets the fall in May. As the graph below shows, employment data in Australia is very volatile but the recent trend is flat to down slightly.... [more] Kiwi the top performer Thursday, 10 July, 2008 The US dollar was on the back foot overnight as it retraced some of the previous day’s gains, this saw the Aussie and Kiwi edge up against their US counterpart to trade at 0.9560 and 0.7580 respectively. The Kiwi fared a little better than the Aussie seeing the cross up to 0.7930. Oil held on to yesterday’s US$5 loss to remain below US$136 per barrel. It appears that there has been a lack of any real selling interest in the Kiwi recently, which is making any movement to the downside relatively short-lived – certainly there has been little selling of the Kiwi below 0.75. This situation could pave the way for the Kiwi to move higher, especially if next weeks inflation data comes in higher than expected.... [more] Commodities take a hit Wednesday, 9 July, 2008 Oil took a US$5 dive down to US$136 per barrel overnight after breaking up to a record high of US$145 as recently as Monday. Gold, silver, copper and corn joined in the decline as the continuing spate of soft global data is causing investors to second-guess the forecasts for demand. Obviously, consumers and inflation-conscious Central Bankers alike will welcome any softening in commodity prices. The Kiwi and Aussie came off following oil but failed to hold a break below 0.75 and 0.95 respectively. The currencies managed to regain some of the oil led loss to trade just above those levels. The Kiwi-Aussie cross remained steady at a touch below 0.79.... [more] More Pressure on US Mortgage Firms Tuesday, 8 July, 2008 The two big US Mortgage Firms being Freddie Mac and Fannie Mae fell sharply overnight after analysts suggested both bodies will require further capital. These two organizations are Government sponsored mortgage lenders. Originally set up after the Depression of the 1930’s they have grown to become the biggest home lenders in the USA. Speculation around their funding requirements arose after the US Financial Accounting Standards Board (FASB) announced plans for a new accounting standard (FASB 140) that would require companies to report on all off balance sheet entities.... [more] All Quiet on the Western Front Monday, 7 July, 2008 After last weeks turbulent times in world financial markets, traders around the globe were thankful of the July 4th Holiday in the USA. This saw the US market closed and most other markets trade quietly. The Equity markets were hardest hit last week with most indices trading at their lowest level in over a year. However by weeks-end many markets look to have reached a short term low and we could well see some form of recovery over the next few weeks.... [more] ECB Hikes – Euro Falls Friday, 4 July, 2008 In a much anticipated move the European Central Bank raised interest rates by 0.25% last night to take the official cash rate up to 4.25%. Announcing the move the ECB Head, Jean Claude Trichet said they had no plans to raise rates further at this time. This saw the Euro plunge 2 cents vs the US$ as the market had anticipated that this would be the first in a series of moves. In fact the money markets in Euro are still pricing in a 100% chance of another +0.25% rise by the end of the year and a 50% chance of another move in the 1st quarter of next year.... [more] Growth Slowdown Goes Global Wednesday, 2 July, 2008 In the clearest evidence yet that the growth slowdown that began in the USA is spreading out around the world reports from a number of countries overnight confirmed that growth will slow all around the western world. From the UK we had news that UK house prices are now -6.3 % lower than a year earlier and the UK is now a 50/50 bet as to whether it falls into recession. In Europe Denmark became the first European country to have two negative quarters of growth putting it into recession. Japan yesterday released its quarterly business outlook report called the Tankan and it showed businesses expect tough times ahead and predicts the first drop in profitability since 2001.... [more] NZ Business Confidence rebounds in June Tuesday, 1 July, 2008 Yesterday’s release of business confidence for June showed a surprise rebound as businesses became less pessimistic about the outlook in general. Added to this was a slight up tick in their views about heir own business activity. On balance the report is good news and shows that the economy may be in for a flat period where growth settles at about 1.0% this year before recovering to be above 2.0% next year. Looking across the industries the biggest rebound came in nonresidential construction which went from -61% negative to just -11. This seems logical as businesses keep investing in new plant and equipment and the Government remains committed to the huge infrastructure catch up that is underway.... [more] Drought pushes growth into the negative Monday, 30 June, 2008 Friday’s much awaited Growth data came in right on expectations at -0.3% for the March quarter, bringing annual growth down to +1.9%. Ironically though it was the effects of the drought that hit during the long hot summer that pushed agricultural production down and dragged growth into the negative. In the absence of the drought, growth would have been slightly positive. So this leaves us with a mild slowdown across the economy led primarily by the property sector with construction activity expected to remain subdued for sometime yet. The rest of the economy seems to be holding up reasonably well.... [more] Storms hit financial markets Friday, 27 June, 2008 Whilst New Zealand has had a week of stormy weather it was the international financial markets that felt the chill overnight with sharemarkets around the world dropping sharply and the price of Oil hitting US$140 per barrel. Ironically the currency markets were relatively stable.... [more] Fed holds rates at 2% Thursday, 26 June, 2008 The US Central Bank kept the official cash rate unchanged at 2.00% this morning, but they upgraded their outlook for both the economy and inflation. They said growth would continue to expand although at a moderate rate. They also said upside risks to inflation had increased but inflation is expected to moderate next year.... [more] All quiet ahead of the US Fed Wednesday, 25 June, 2008 Financial markets around the globe were largely unchanged ahead of the US Central Banks review of interest rates tomorrow morning. Most expect no change in the current 2.0% rate but as always the accompanying statement will be scrutinised for clues as to the future path of interest rates. The Fed has been on record as saying that rates will not be lowered any more so the market will be looking for a signal as to when the first rise in rates will come.... [more] Europe, UK in the spotlight Tuesday, 24 June, 2008 The USA took a back seat overnight as financial markets focused on weaker European and UK data for a change In Europe the IFO German business confidence data showed its weakest reading since 2005, causing investors to reassess whether the European Central Bank (ECB) will really raise interest rates in the next few months as they have recently indicated This caused the Euro to drop over 1.0% vs the US$.... [more] NZ growth data focus for the week Monday, 23 June, 2008 This week’s main focus for the NZ market will be the release of first quarter growth data on Friday. Expectations are for growth to have contracted in the quarter by -0.3%. Second quarter growth is estimated to have suffered a similar decline. So the much talked of rebalancing of economic growth is here and happening. Ironically though the currency has only fallen slightly from a peak just above 0.80 to be trading around 0.76 this morning. This despite the widespread expectations of a contraction in the economy. The reason for this is that most other Western nations are experiencing similar economic conditions.... [more] The Big week ahead Friday, 20 June, 2008 The Kiwi and Aussie rose a touch on a soft US dollar last night, topping off a week of mild gains to finish at 0.7625 and 0.9515 respectively. The US$ weakness came after the Philadelphia Fed survey released last night showed that US growth may again be on the back foot. The Philadelphia Fed survey is an important measure of the outlook for US manufacturers, who are having a tough time of late as cooling consumer spending, high fuel costs and the housing slump works its way back up the food chain. The survey came in at -17.1 against the -10 expected. A result below 0 signals a probable decline in manufacturing. This led traders to scale back bets that a Fed interest rate hike this year is a sure thing.... [more] Oil: who’s to blame? Thursday, 19 June, 2008 In a relatively quiet night of trading, the Kiwi drifted back up half a cent over the ground lost earlier this week to finish just under 0.76 this morning. The Aussie followed suit, though not making up quite as much ground. It is currently trading just above 0.9450 against the US$. Given the data free night, we will take the opportunity to talk about the oil markets, which have taken a bit of a back seat in the currency markets in the last week even after spiking to US$140 per barrel on Tuesday night. There is currently a lot of debate surrounding the explosion in the price of oil - justifiably so, as it has risen over 600% since 2001.... [more] Reserve Bank of Australia on Hold Wednesday, 18 June, 2008 US housing starts came in 5k under forecast at 975k annualised, which helped contribute to a weaker US dollar last night. The Aussie and Kiwi rose marginally against the US$ to 0.9440 and 0.7550 respectively, leaving the Kiwi/Aussie cross unchanged around 0.80. Decreased US housing starts is actually good news for the States, who already have to clear a large inventory of unsold homes before normal supply and demand can resume. In Australia, the minutes from the Reserve Bank of Australia’s June interest rate meeting released yesterday said that “on current policy settings, the necessary moderation in demand growth was likely to occur”... [more] Housing not just an NZ problem Tuesday, 17 June, 2008 The markets were relatively quiet overnight as the G8 meeting and two separate speeches from the US Fed failed to drum further US$ support. The US empire manufacturing survey came in at - 8.7, much softer than the -2.0 forecast. As this further weighs on US growth prospects, the US$ eased, mainly against the Euro but also saw the Kiwi and Aussie edge up slightly to finish at 0.7530 and 0.94 respectively. In the absence of action in the currency markets, we will take the opportunity to re-cap the housing situation, as last weeks NZ housing data slipped by largely unnoticed.... [more] Tough times ahead for NZ retailers Monday, 16 June, 2008 Friday saw the release of NZ Retail Sales data for the month of April. The headline number showed a 1.0% rebound, but after excluding the impact of motor vehicle sales, the core number was a 0.5% decline. This was in line with expectations as consumers struggle to cope with soaring food and fuel prices. However, some aspects of the data seemed a little strange with the two big spending categories of supermarket and petrol showing large declines. This may mean there is a rebound in store when the May results are released. On balance though, we expect retail sales to remain subdued over the winter as households have no option but to cut back on their spending. The silver lining to this rather gloomy outlook is there is just over three months to go until the first tax cut on October 1 (followed shortly after by the Election).... [more] Cracks appear in the Aussie wall Friday, 13 June, 2008 After seeing very weak confidence figures from the Australian Westpac consumer confidence survey (see yesterdays report), it appears that the cracks in the Aussie economy are deepening, and more importantly, are starting to be noticed in the currency markets. Jobs data released yesterday pushed unemployment to 4.3% after the total number of jobs decreased by nearly 20,000 last month. An increase of 13,500 new jobs was expected. As we have said before, Australia is in a bit of a quandary. Record commodity performance is providing windfall gains for a relatively small section of the country while the rest of the economy suffers from fragile housing markets, growing concern amongst consumers, falling retail sales, high interest rates, and now, increasing unemployment.... [more] Is Australia digging itself into a hole? Thursday, 12 June, 2008 Volatility continued in world financial markets last night with the price of Oil rebounding $7.00 after a report showed a bigger than expected drop in supplies. This rebound in Oil saw the US$ lose some ground vs the major currencies and sharemarkets generally weaker around the globe. The NZD recovered slightly overnight vs the US Dollar after yesterday’s strong terms of trade data suggested that there will be an ongoing boost to the economy from the export side. The terms of trade measures how many dollars of imports you can buy with a given amount of exports. The Index increased by +4.1% in the March quarter, well above the +0.9% expected. In annual terms the increase was +11.3%, again well above the +7.2% expected by the Reserve Bank. Whilst export volumes were down in the quarter, this was largely driven by timing issues and we expect a strong rebound in Q2....