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NZD makes some ground on the YEN

Written by Sam Coxhead on December 23rd, 2011.      0 comments

11:35 AM (NZT) After a hesitant start to the week the NZD has seen grinding appreciation against the YEN as the wider market appetite for risk has increased. The increased risk appetite has been driven by a couple of different factors. The economic data has been more positive than expected this week, with good news coming from the UK, Europe and the US. This combined with a sharp exit of risk aversion trades has produces this move. The low levels of liquidity are also a factor and has accentuated the move. Expect some solid resistance to come in at 61.50 if the move continues through into the last week of the year.
 
The current interbank midrate is:                                                            NZDYEN 60.43                              
                                                               
The interbank range so far this week to date has been:                 NZDYEN 58.82 – 60.57               
 

Is the NZD good selling against the EURO at current levels?

Written by Sam Coxhead on December 23rd, 2011.      0 comments

11:00 AM (NZT) The NZ dollar has had a week of grinding appreciation against the EURO. Better economic news for the most part has combined with the reversal of the risk aversion trades, and this has driven then demand for the  NZD. Current levels represent very good value buying of EURO with New Zealand dollars. Even after this week’s move the pair remains in somewhat familiar territory. The .5950 resistance (EURNZD 1.6800 support) provides the next target area for the pair. This week’s risk appetite has been somewhat surprising and could well be a product of the illiquid nature of the festive season markets. Expect the European debt situation to continue its prolonged drama in 2012, which will affect global growth and therefore the performance of the NZ dollar.
 
The current interbank midrate is:                                                            NZDEUR .5914                                          EURNZD 1.6909
                                                               
The interbank range so far this week to date has been:                 NZDEUR .5800 - .5940                           EURNZD 1.6835 – 1.7241
 

The NZDGBP pair treads water

Written by Sam Coxhead on December 23rd, 2011.      0 comments

10:15 AM (NZT) This pairing has been relatively stable this week. The resurgence of risk appetite has seen the NZD make up a little ground, but the pair remains in very familiar territory. Expect initial resistance at .4950 (GBPNZD support 2.0200) and this will likely hold ahead of the Christmas break. There is little economic data ahead of January to moves the rates too far, so expect that we start 2012 around similar levels. The rumours remain that credit agencies remain poised to downgrade further European sovereign entities, and this would be NZD negative if this eventuates.
 
The current interbank midrate is:                                                            NZDGBP .4927                              GBPNZD 2.0296
                                                               
The interbank range so far this week to date has been:                 NZDEUR .4864 - .4946                GBPNZD 2.0218 – 2.059
 

Whats is going on in world economies this week?

Written by Sam Coxhead on December 22nd, 2011.      0 comments

5:15 PM (NZT) Of note:
Daily evidence of seasonally low levels of liquidity has seen flow driven moves accentuated. These conditions can make for frustrating markets at times. It will pay to be aware that these conditions are usual for this holiday period and unless unusual moves are backed up by a run of economic data or news, these moves usually falter. The reaction to the ECB funding offering of 3 year secured funds at 1.0% was very well received by the banks overnight. So much so that 489 billion worth of securities were offered for the cash. This illustrates the fragility of funding markets in Europe. This caused the US dollar resurgence on Wednesday in the offshore session, in line with further risk aversion.
 
The Australian Economy:
The news in Australia for the week has been the release of the RBA monetary policy meeting minutes from two weeks ago. The minutes were fairly guarded and noncommittal  as is usual from the RBA. If anything they fall on the side of being “dovish”, that is  they do not point towards a further cut to the cash rate in the early 2012 months, as the market might have looked for. Next week sees the release of private sector credit on Friday as a focus, and it is likely this will have little effect on the exchange rate.
 
The New Zealand Economy:
In New Zealand this week business and consumer confidence numbers were released on Monday. These were both slightly weaker, albeit the declines not at overly alarming levels, given the widely reported uncertain global economy. Wednesday saw the release of the 3rd quarter numbers for the current account. This number showed a larger deficit than expected and can be attributable to exported products receiving lower prices. The big question is whether or not this will continue to be a trend in 2012. This morning’s all important 3rd quarter GDP number showed the economy grew .8% in the quarter, against an expectation of .6% growth. There are no economic data releases next week, so all price action for the exchange rate will be driven by offshore leads.
 
The US Economy:
On balance news continues its positive run in the US. Interestingly building permit numbers for new dwellings were better than expected, and existing home sales were slightly worse than expected. The positive news added to some better news in the Eurozone and the UK, to push US equity markets up 3% yesterday. Only downward earnings revisions from software giant Oracle in the aftermarket took the gloss off a surprisingly positive day. Tomorrow sees final GDP readings, durable goods orders and new home sales numbers released.
 
The European Economy:
German business climate numbers on Tuesday were better than expected and helped create a positive session for markets globally. The ECB bank funding offer operation overnight has proven to be a victim of its own success. Market expectations were that around 300 billion Euros would be sought by banks, but 489 billion was actually sought. As noted above, this illustrates the frozen nature of funding markets and the banking sectors attraction to cash offerings to sustain themselves. There is continual speculation around the credit rating agencies and their monitoring of various state and bank entities in Europe. Of note overnight was a release by S&P, that a credit down grade for France would impact on the size of the European Financial Stability Fund. This kind of headline is Euro-zone negative, and is something that should be on the radar for 2012.
 
The UK Economy:

In the UK the BOE monetary policy meeting minutes did not surprise. Committee members unanimously agreed to leave monetary policy unchanged for the time being. Public sector net borrowing was slightly lower than expected, but not by a material amount to improve the debt outlook. There were some 2nd tier retail sales numbers which were encouraging. If these continue, they could improve sentiment in that sector. Later today the release of current account numbers and final 3rd quarter GDP number will be closely watched. Next week just sees housing numbers due for release, with likely limited impact.
  
The Japanese Economy:
Tough conditions in Japan continue into year end. Obviously of primary concern remains the YEN’s strength. Government sources were quoted on Reuters as saying growth forecasts for 2011/12 and 12/13, are again going to be downwardly revised to -.1% (from .5%) and 2.2% (from 2.8%) respectively.  Numbers like these do little to improve sentiment. The earthquake rebuild is also taking longer than many expected. Expected further YEN weakening strategies from officials in 2012.
 
The Canadian Economy:
Canadian inflationary pressure remains benign as illustrated by the monthly inflation numbers that came in at just .1%. Last night’s retail sales numbers provided a little action with the .7% numbers well beating the expectation of .3%. The Canadian economy continues along its path of muted activity for the most part, but it is still somewhat better placed than most other western nations. The continued pickup in activity in the US will be encouraging for 2012, as long as the worst case scenario does not play out in Europe.
 

What has moved the NZ dollar against the CAD this week?

Written by Sam Coxhead on December 22nd, 2011.      0 comments

5:10 PM (NZT) After seeing some initial pressure from the CAD early on Monday the New Zealand dollar turned around the pressure and made some decent ground throughout the middle of the week to set the highs so far.  The sentiment turned as the positive Canadian retail sales number coincided with the ECB release of details on their 3year bank funding operation. The funds lent were far more than expected and this illustrates the issues that the European credit markets face. So the risk aversion has reemerged as we approach the end of the week. Canadian GDP numbers late Friday remain the focus from here. Expect the NZD to see further pressure if the number is better than the .1% expectation.
 
The current interbank midrate is:                                                            NZDCAD .7888                            
                                                               
The interbank range so far this week to date has been:                 NZDCAD .7824 - .7950              
 

Wild ride for the AUD against the Canadian dollar.

Written by Sam Coxhead on December 22nd, 2011.      0 comments

5:00 PM (NZT) After initially the AUD seeing a little pressure from the CAD, the turnaround in sentiment came quickly. As we have seen for a third time now in the last six weeks, the reversal of a risk averse sentiment can be particularly sharp. The AUD demand was driven by a number of factors. Better than expected economic data in the UK, Europe and the US was back up with a surprisingly strong Spanish bond auction. This sparked the demand for risk assets and the rush for the exit of risk aversion trades. The high at 1.0450 was brief to say the least as the strong Canadian retail sales number coincided with the ECB 3year funding operation details. The larger than expected demand for the ECB funds have spooked the market again, as it illustrates the need for banking funding in Europe for back to survive. Look for further movement within the familiar 1.0250-1.0450 range throughout the festive season.
 
The current interbank midrate is:                                                            AUDCAD 1.0350                              
                                                               
The interbank range so far this week to date has been:                 AUDCAD 1.0253 – 1.0450              
 

The Australian dollar sets all time highs against the EURO

Written by Sam Coxhead on December 22nd, 2011.      0 comments

3:25 PM (NZT) The EURO has seen period  of intense pressure from the Australian dollar this week. Tuesday saw a rush to buy growth assets as better than expected economic data, good debt auctions in Europe, and soaring commodity prices saw a rush to exit “risk aversion” positions. This has pushed this pairing to the all time  high extremes by the AUD over the EUR. The ECB funding operations overnight took the sting out of the demand for risk assets. It illustrated to the extent that the European banks crave cash at the moment, which is indicative of very tight credit markets. Needless to say, patience will probably pay off for those looking to buy AUD with Euro’s. Those looking to buy Euro’s with AUD should consider their move quickly, as the festive market extremes often do not last into the new year. With little in the way of economic data next week, the lead will likely come from general market sentiment.
 
The current interbank midrate is:                                                            AUDEUR .7717                              EURAUD 1.2958
                                                               
The interbank range so far this week to date has been:                 AUDEUR .7600 - .7771               EURAUD 1.2868 – 1.3158
 

The AUD GBP pair retreats to middle ground

Written by Sam Coxhead on December 22nd, 2011.      0 comments

3:00 PM (NZT) This pair bounce nicely off support at .6380 (resistance GBPAUD 1.5675) as the risk appetite increased across all markets on Tuesday. The spike in demand for growth assets was driven by a combination of better than expected economic data, bond auction results in Europe and “sold position” covering. The markets has been very “sold” EUR, and risk assets in general. As we have seen over the last couple of months on three occasions now, the scramble to cover these overweight positions is akin to a crowd rushing through a door. At any rate, the risk appetite waned overnight as the ECB conducted their 3 year liquidity operations and the huge demand has illustrated how financially challenged many of the European banks are. Numerous rumours of further sovereign credit downgrades will not help sentiment ahead of Christmas. This may lead towards further downside potential for the AUD on this pairing in the short term
 
The current interbank midrate is:                                                            AUDGBP .6422                               GBPAUD 1.5571
                                                               
The interbank range so far this week to date has been:                 AUDGBP .6374 - .6494                GBPAUD 1.5689 – 1.5389 
 

The NZ Doolar struggles to hold onto gains against the USD.

Written by Sam Coxhead on December 22nd, 2011.      0 comments

1:45 PM (NZT) The NZ dollar made up some of its recently lost ground this week, albeit now back from its peak. The wider market risk appetite was driven by better economic news, and “sold position” covering, that saw a scramble for risk assets in an liquid market. The NZD lost ground against the US dollar overnight, as the news came of the large extent of which the ECB had been approached for their offering of 3 year funds at low fixed rates. Today’s better than expected 3rd quarter GDP number saw little positive reaction from the NZD, and the increasing risk aversion again now dominates sentiment. The remainder of the week sees the focus in the US, with final GDP and consumer sentiment readings overnight, and durable goods and new homes sales releases on Friday. Expect the lead to be again driven from events or announcement in Europe. Overall sentiment remains to the downside from the NZD against the US dollar.
 
The current interbank midrate is:                                                            NZDUSD .7680 
                                                                                         
The interbank range so far this week to date has been:                 NZDUSD .7538 - .777
 

Which way for the AUD USD pair?

Written by Sam Coxhead on December 22nd, 2011.      0 comments

1:15 PM (NZT) This pair has been reasonable volatile this week, whilst remaining within a contained range. The AUD has been under pressure on the balance, and this has been indicative of the overall risk aversion in the wider market. The GBP has seen its own periods of pressure, so AUD bounces have been more periods of GBP weakness, as opposed to any real outright AUD strength.  After this week’s AUD weakness, we are now back towards the years average levels, and very close to where the pair started 2011. Next week both respective banks come back into focus with the release of the meeting minutes from last week’s monetary policy announcements in both countries. Tuesday is the urn of the RBA and Wednesday of the BOE. Both will be closely watched for any clues as to the timing of further policy easing in early 2012. There is potential for further volatility as levels of liquidity further fall as the end of the year approaches.
 
The current interbank midrate is:                                                            AUDGBP .6400                               GBPAUD 1.5625
                                                               
The interbank range so far this week to date has been:                 AUDGBP .6381 - .6523                GBPAUD 1.5330 – 1.5671
 

NZ GDP growth does little for the NZD against the AUD in the pre-Christmas markets

Written by Sam Coxhead on December 22nd, 2011.      0 comments

1:10 PM (NZT) This week has seen a continuation of the recent trend of pressure being placed on the NZD by the AUD. With little in the way of major economic data in either economy, it has been curious price action. Evidence of stop-loss buying of AUD has again been reasonably plain to see. Last night’s bounce back in favour of the NZD will come of welcomed relief to those looking to buy AUD with NZ dollars. NZ GDP next Thursday looks to be the key to this pair in the short term. A better than expected number should see the NZD back in demand, and the pair move back towards more historically average levels, especially considering the interest rate differentials between the two countries are closing. Current levels still represent very good value buying of NZD with AUD. For those looking to buy AUD, patience remains the key if you have time on your side.
 
The current interbank midrate is:                                                            NZDAUD .7594                               AUDNZD 1.3168
                                                               
The interbank range so far this week to date has been:                 NZDAUD .7523 - .7595                 AUDNZD 1.3167 – 1.3293
 

3rd quarter NZ GDP beats expectations

Written by Sam Coxhead on December 22nd, 2011.      0 comments

11:10 AM (NZT) In the offshore session yesterday’s squeeze higher in risk assets continued ahead of the ECB offering to of 3year funding term loans to banks. Thus kept the US dollar on the back foot for the most part. 310billion EUR of funding was expected but demand was higher than expect and the total amount lent was a whopping 489 billion EURO.  The larger than expected demand for funding has spooked the markets a little, which are already suffering the holiday conditions of lower liquidity and the associated volatility. The US dollar has seen a resurgence as the spread between price of German and the peripheral Euro-zone debt again started to blow out. Further rumours of credit downgrades abound, and this further lent on risk assets.
 
Meanwhile just released NZ 3rd quarter GDP numbers showed a +.8 increase in activity for the quarter against an expectation of a .6% number. The NZD initially made a little ground across the board, but overall the reaction was not dramatic. The increased activity looks to be driven by food manufacturing and retail, accommodation and restaurant spending. This can be attributable to the Rugby World Cup.
 
Expect market conditions to remain volatile for a next few weeks with the holiday period meaning that liquidity levels will remain low, accentuating moves.
 
          Past 24 hours
  Current level Pre-NZ GDP  % Chge since NZ GDP   Low High
NZD/USD 0.7706 0.7704 0.03%   0.7650 0.7778
AUD/USD 1.0100 1.0091 0.09%   1.0047 1.0220
NZD/AUD 0.7632 0.7632 0.00%   0.7597 0.7646
AUD/NZD 1.3103 1.3103 0.00%   1.3079 1.3163
NZD/GBP 0.4915 0.4911 0.08%   0.4878 0.4940
NZD/EUR 0.5905 0.5801 1.76%   0.5858 0.5912
NZD/YEN 60.15 60.14 0.02%   59.55 60.41
NZD/CAD 0.7908 0.7902 0.08%   0.7874 0.7949
 

RBA minutes show board not as commited to easings rates as expected.

Written by Sam Coxhead on December 20th, 2011.      0 comments

12.15 PM (AEST) The just released RBA minutes show the board deciding monetary policy may not be as commited to further easing in February as expected.

Obviously the main concerns remain around the Euopean debt crisis and the impact this will have on the wider economy. Keeping momentum up in the Australian economy is business investment, and in mining in particular.

The AUD had a curious reaction to the minutes, but was unsurprising given the time of year. The NZD was a little eavuy against the AUD all morning but saw surprising demand following the announcement. Lower levels of liquidity are evident, meaning one off flows are having more impact that usual.

          Past 24 hours
  Current level Pre-RBA mins  % Chge since RBA mins   Low  High
NZD/USD 0.7585 0.7562 0.30%   0.7538 0.7628
AUD/USD 0.9931 0.9920 0.11%   0.9879 0.9970
NZD/AUD 0.7640 0.7625 0.20%   0.7612 0.7655
AUD/NZD 1.3089 1.3115 -0.20%   1.3063 1.3137
NZD/GBP 0.4899 0.4873 0.53%   0.4864 0.4922
NZD/EUR 0.5765 0.5812 -0.82%   0.5800 0.5852
NZD/YEN 60.68 58.95 2.85%   58.82 .59.42
NZD/CAD 0.7980 0.7850 1.63%   0.7824 0.7901


 

The Final Weekly FX Update for 2011 - 19 December 2011

Written by Sam Coxhead on December 19th, 2011.      0 comments

7:35 PM (NZT)

Currency Commentaries:

Click to access our currency pair reports:  
NZD/USD                                      AUD/USD                                    GBP/USD
NZD/AUD (AUD/NZD)                    AUD/GBP (GBPAUD)                    GBP/EUR (EUR/GBP)
NZD/GBP (GBP/NZD)                    AUD/EUR (EUR/AUD)                   GBP/RAND
NZD/EUR (EUR/NZD)
NZD/CAD                                                            
NZD/RAND
NZD/YEN

Major Announcements last week:

  • Australian home loans +.7% vs +.1% expected
·          UK inflation 4.8% as expected
·          European economic sentiment +53.8 vs -56.1 expected
·          US retail sales +.2% vs +.6% expected
·          US Federal Reserve leaves monetary policy unchanged
·          UK unemployment rate 8.3% vs 8.4% expected
·          HSBC Chinese manufacturing index 49.0 vs 47.7 previously
·          UK retail sales -.4% vs -.3% expected (previous month revised from +.6% to 1.0%)
·          European inflation 3.0% as expected
·          US weekly jobless claims 366k, best number in 3 years
·          US Philadelphia Fed manufacturing index 10.3 vs 5.1 expected
·          US core inflation  .2% vs .1% expected
·          French credit rating placed on negative watch
·          Chinese residential real estate prices see second month of declines

Market Overview :

As expected the financial markets focus remained on Europe for the most part last week. With low levels of liquidity as holidays and year end approaches, the price action in all markets was erratic at times.  Economic data remains patchy at best. In the US lower than expected retail sales numbers we countered by better jobless claims and manufacturing data releases. In Europe, various Italian and Spanish debt auctions saw better than expected demand, but the threat of credit downgrades weighed on investor sentiment. For the most part the US dollar remained in demand, before giving back a little of its gains as the weekend approached.
 
In New Zealand there was a lack of domestic focus last week, in the absence of local economic news. This week we have the much anticipated 3rd quarter GDP numbers to look forward to on Thursday. Expectations are for around a .8% increase in activity on the quarter, with a boost expected to have come through the Rugby World Cup. Expect a little positioning ahead of this number. Evidence of this came in the offshore session on Friday, when the NZD finally saw some decent demand. This looked to be some squaring up of speculative “sold NZD” positions, especially against the Australian dollar.
 
In Australia last week there was little in the way of major economic news. Mondays home loans data was better than expected, but this was tempered by a downward revision of the previous months number. With a gloomier global growth outlook permeating on a weekly basis, the bias towards a lower Australian dollar is now firmly in place. Further evidence of a slowdown in China came over the weekend with news national property prices were lower for the second straight month. Speculation is now increasing that further loosening of monetary conditions from Chinese authorities is imminent. A slowing Chinese and wider Asian economy will materially affect the Australian economic outlook for 2012. Expect further easing to the cash rate in 2012, and the contraction of interest rate differentials, should lead to easing in demand for Australian dollars across the board in the coming quarters. This week’s focus will be Tuesday’s Reserve Bank of Australia’s (RBA) meeting minutes from the RBA monetary policy meeting two weeks ago.
 
In the US the economic picture remains one of sluggish growth. The much lower weekly jobless claims numbers last week are encouraging. This was the best number in three years for this series and points to a further reduction in the unemployment rate if momentum can be maintained. The surprisingly strong manufacturing index is also another positive sign for the economy. By far the largest risk is  further implosion in Europe in the first half of 2012, in terms of both economic and financial risks. If stability can be found in Europe, the gradual emergence back to health for the US economy should continue. This week’s focus is on the various housing numbers due for release, along with final 3rd quarter GDP readings and the “durable goods“ number on Friday.
 
European tensions remain the focus globally. Close attention to debt markets continues, especially as the speculation of moves by credit agencies continues. Fitch has placed France on negative watch, and rumours of a move by S&P this week are rife. Expect focus to continue on Greek and Italian debt markets in the first half of 2012, as some massive borrowings mature for both countries. The ability to rollover debt remains the key. Fast paced structural changes are required to placate lenders. Until hard evidence is in place that changes are being made, the pressure will remain. Tuesday will be the primary focus this week, with ECB President Draghi speaking ahead of the important German Business Climate numbers.
 
Economic news in the UK remained downbeat for the most part last week. One bright spot was a small pick up in the monthly employment numbers. This improvement will need to continue for a number of months for this to materially change the outlook in the UK. Expect more quantitative easing early in 2012 from the Bank of England (BOE), now that the inflationary pressure is finally falling. The focus for the coming week will be on the BOE monetary policy meeting minutes due for release on Wednesday. If sentiment again turns nasty in Europe, expect the Pound Sterling to make further ground against both the New Zealand and Australian dollars.
 
There was very little in the way of top tier economic data in Canada last week. Most of the lead came from the US dollar for the CAD. This week keeps those with Canadian dollar interests focused ahead of Christmas. Tuesday sees the release of the inflation numbers, Wednesday retail sales numbers, and on Friday monthly GDP numbers are released. If the global uncertainty picks up in 2012, the CAD will push back towards more historically average levels against both the NZD and AUD.
 
The Japanese economy had no top tier economic news last week. Interestingly in a survey of Japans largest manufacturers there was evidence of again growing pessimism as the high level of the YEN strangles the economy.  This week sees the Bank of Japan (BOJ) announce monetary policy on Wednesday. Whilst no change is expected to the conventional monetary policy, alternative methods may be on offer. Various offshore investment initiatives have struggled to have the desired effect on the YEN, but Japanese authorities remain poised to make significant contributions to the IMF to bolster European bailout resources. This has the double effect of placing downward pressure directly on the YEN, and hopefully providing stability for Europe, which overtime will aid the EURO’s recovery, and again reduce demand for YEN. Expect further measures such as these from authorities and the BOJ throughout 2012.

 

When will the NZD regain lost ground against the AUD?

Written by Sam Coxhead on December 16th, 2011.      0 comments

4:36 PM (NZT) This week has seen a continuation of the recent trend of pressure being placed on the NZD by the AUD. With little in the way of major economic data in either economy, it has been curious price action. Evidence of stop-loss buying of AUD has again been reasonably plain to see. Last night’s bounce back in favour of the NZD will come of welcomed relief to those looking to buy AUD with NZ dollars. NZ GDP next Thursday looks to be the key to this pair in the short term. A better than expected number should see the NZD back in demand, and the pair move back towards more historically average levels, especially considering the interest rate differentials between the two countries are closing. Current levels still represent very good value buying of NZD with AUD. For those looking to buy AUD, patience remains the key if you have time on your side.
 
The current interbank midrate is:                                                            NZDAUD .7594                               AUDNZD 1.3168
                                                               
The interbank range so far this week to date has been:                 NZDAUD .7523 - .7595                 AUDNZD 1.3167 – 1.3293