Daily Economic Commentary: New Zealand

[ForexGump]

After a relatively slow week, is the NZD gearing up for a manic Monday? Retail sales and core retail sales have both been upbeat, posting 0.8% and 1.6% increases respectively. However, commodity prices have been sliding down, casting a bearish outlook on the NZD.

The rise in New Zealand's retail sales boosted hopes that the nation could emerge from the recession earlier than expected. Record-low interest rates and income tax cuts seem to have done the trick for their economy. RBNZ Governor Alan Bollard projected that economic growth could turn positive by the fourth quarter of this year.

The fall in commodity prices, however, acts as counterweight to a potential NZD rally. Oil prices retreated below $60 per barrel while gold prices dropped by $3.70 to $912.50 per ounce.

Hard-hitting economic reports from New Zealand remain scarce, with only CPI data due on Wednesday. This leaves the NZD/USD eyeing the southbound route for the rest of the week, unless a surge of risk appetite calls for a U-turn.

[ForexGump]

The NZD started the day on a positive note after the retails sales reports showed some better-than-expected results. It gains, however, quickly flew as the NZD found itself under the sand for the remaining part of the Asia session up until the start of the US trading session. The NZD was then able to shrug off its early losses to close the day up against USD and the JPY. Such wouldn’t be possible without the help of Meredith Whitney.

As mentioned, New Zealand’s retail sales for the month of May came in better than expected by gaining 0.8%. The account was only expected to rise by 0.3% following a 0.5% jump in April. Retail sales measure the total value of sales at a retail level. The gains in the figure further add that the RBNZ’s low interest rates and the government’s tax cuts are spurring some economic activity. New Zealand’s core retail sales, which exclude automobile sales, also gained by 1.6% after coming in flat in April. The figure was only projected to post a 0.5% rise.

In the mean time, the NZD rose for the most part of the US session as buyers once again flocked the US capitals markets. The US financials buoyed the entire stock market with Meredith Whitney’s ‘buy’ recommendation on Goldman Sachs. Meredith Whitney is the founder of Meredith Whitney Advisory Group LLC.

No economic reports are due today in New Zealand. The NZD’s movement may be dictated by the sentiment in the US market. The NZD may benefit once again from the positive expectation in the US PPI and retail sales.

[ForexGump]

The NZD soared yesterday, breaking the 1.6400 handle versus the USD. The sharp move upside was most likely caused by traders increased appetite for risk as New Zealand’s economic cupboard was completely barren.

Today we’ve got New Zealand’s consumer price index at 10:45 pm GMT. It would most likely print a 0.5% increase in prices. The actual result probably won’t be too far away from the consensus since economists have been pretty spot on target with their predictions with regards to New Zealand’s CPI the month’s before.

The currency would still probably be driven by degrees in risk appetite so it’d be best to keep an eye out for any significant shift in risk sentiment.

[ForexGump]

Great day yesterday for bullish NZD traders, as the NZD skyrocketed against the USD as risk appetite continued to push commodity currencies higher. The NZDUSD pair closed 150 pips higher, finishing the trading day at .6502.

New Zealand’s quarterly CPI report indicated that consumer prices rose by 0.6% from the first quarter to the second quarter of this year, which was slightly higher than the forecasted 0.5% increase. Still, the inflation rate stands at 1.9% in the year through June 30. RBNZ Governor Alan Bollard expects this to hit just 0.7% by the end of the current quarter.

With no other data coming out this week, risk sentiment will most probably continue to drive the markets. Be cautious on any changes in sentiment that can alter price action.

[ForexGump]

Although the NZD/USD started the day with a dive towards the 0.6400 level, tides turned later on as the pair recovered back to 0.6500. Despite the surge of risk appetite yesterday, it was unable to make any further advances due to Fitch's surprise cut of the nation's economic outlook.

Rating agency Fitch expressed its concern about New Zealand's large current account deficit. The agency downgraded their outlook for the nation's economy from stable to negative, which exposes New Zealand to the danger of a credit rating downgrade. This announcement came as a surprise especially since RBNZ Governor Alan Bollard expects New Zealand to be ahead of the pack in terms of economic recovery.

Nonetheless, the improvement in risk appetite allowed the NZD/USD to keep its head above water as it lingers above 0.6400. No economic reports are on the agenda for today but potential sentiment-shifting news may come in the form of earnings reports from the US. Could the NZD/USD count on risk appetite for another day?

[ForexGump]

What goes up must come down. That’s exactly the case with NZD last Friday as it found itself shortchanged against all the other major currencies to end the week. The NZD started the week hot due to increased risk appetite in the US but it eventually got fatigued during the last leg. Nonetheless, the NZD was still able to close the week positively against USD and JPY despite shedding some of its lead at the finish line.

No top tier economic reports are due today in 'Maoriland.' The NZD may once again be driven by sentiment in the US market for the rest of the week. However, no big time economic updates are also scheduled in the US today. For this reason, trading of the NZD may just be light.

[ForexGump]

Up, up and away went the NZD yesterday as risk taking dominated the foreign exchange market once again. Will the NZD continue its ascent versus the USD and test this year’s highs? Or will we see a pullback from yesterday’s strong rally?

For today, we’ve only got New Zealand’s report on credit card spending for June at 3 am GMT. It has been in the negative territory since December 2009, indicating that the recession’s grip on consumer budget remains tight. In any case, this report doesn’t garner much attention though so event risk would probably be minimal... in the Asian session at least.

[ForexGump]

Slow down Kiwi, slow down! After making a strong push the day before, the NZD gave back some of its gains as news from the US helped put a pause on the recent increase in risk tolerance. The NZDUSD pair closed lower, at .6537.

It’s going to be pretty quiet for the rest of the week, as no economic reports are scheduled for release. Watch out for more shifts in risk sentiment and news concerning commodities, as these are the factors that have been causing the NZD to move as of late.

[ForexGump]

The NZD/USD edged a bit higher yesterday as it made its way slightly above the 0.6600 mark. The lack of economic reports from New Zealand suggest that risk tolerance has a lingering presence in the currency market.

The Kiwi might continue cruising in its current range, with support at 0.6530 and resistance at the previous high of 0.6630. New Zealand's economic calendar is quiet for the remainder of the week, which leaves the NZD/USD vulnerable to sentiment changes brought about by US economic reports. US weekly jobless claims are expected to be slightly higher than last week, which means that risk aversion could make a sudden comeback and drive the NZD/USD lower.

[ForexGump]

‘Gatorade-d’ by risk appetite, the NZD continued its rise over the JPY in yesterday’s trading. The NZD/JPY pair has been on an uptrend since July 13. Being on an uptrend provided two profit opportunities for traders – from capital gains and interest rate differentials. Note that the NZD’s interest rate is pegged at 2.5% while the JPY only has 0.1%.

No economic reports were due yesterday in New Zealand. Today will likewise be quite in terms of economic reports. The NZD’s main driver would be none other than risk tolerance in the US capitals markets. Further risk appetite would support its rise and the short term carry trade strategy over the JPY.