Daily Economic Commentary: New Zealand

[PipDiddy]

Kiwi bulls caught a small wave of risk appetite, riding the NZDUSD slightly higher in yesterdays surfing...err trading sessions. The NZDUSD settled at 0.7141, up more than 35 pips from its opening price.

Looking at the economic calender, it looks like we've got some housing data coming out tonight at 10:00 pm GMT. The REINZ housing price index and home sales reports are due, which are expected to reveal contrasting results. While housing prices have risen by 0.4%, home sales are seen to have dipped by 3.8%.

It will be interesting to see how the RBNZ reacts to this data. If the housing industry is showing signs of weakness, it may give more incentive for the central bank to keep interest rates at current levels.

[PipDiddy]

Despite New Zealand's strong manufacturing data, the Kiwi edged lower against the greenback in yesterday's trading. The NZDUSD slid from the 0.7150 area to a low of 0.7104 during the US session.

New Zealand's manufacturing PMI showed that manufacturing activity grew at its fastest pace in two years. This suggests that the nation's export industry remains undamaged despite the Kiwi's recent appreciation. Hooray for New Zealand!

No other economic reports are due from New Zealand today so keep an eye out for data from other major economies, particularly from the US, since these could affect risk sentiment. Building permits and housing starts are due later today and better than expected results could stir risk appetite and push the Kiwi higher.

[PipDiddy]

The Kiwi, for a second day in a row, lost its touch during last Friday’s session. The NZDUSD fell to and closed at 0.7088 from from 0.7114. The question now is: will the pair be able to stand on its feet and win some this week?

No economic data came out of New Zealand last Friday. The Kiwi, along with the other higher yielding currencies, however, slid against the greenback and yen when the global investment banking and securities giant, Goldman Sachs, was accused of fraud by the Securities and Exchange Commission during the US session.

This week is a little bare for New Zealand with only the release of its first quarter CPI today at 10:45 pm GMT. The country’s headline inflation number is seen to be at 0.6% during the first quarter of this year following a 0.2% drop in general prices during the last leg of 2009. The unexpected 0.6% drop in retail sales in February plus the downward revision in January, though, could translate to a lower-than-projected CPI. The Kiwi could take another hit if such is the case.

[PipDiddy]

After gapping down lower over the weekend, the Kiwi was able to post some minor gains versus the greenback in yesterday's trading session. The NZDUSD ended the US trading session 0.7098, 15 pips higher from its week open price.

Earlier today, however, the Kiwi found itself giving up some ground because of unexpectedly weak inflation data. Although an improvement from the previous period, New Zealand's consumer price index (CPI) for the first quarter of 2010 was only at 0.4%, and not 0.6% like initially expected. Hmm, more reason for the Reserve Bank of New Zealand to keep interest rates at 2.50%?

No data coming out of New Zealand for the rest of the day so the Kiwi's price action would most likely be dictated by news coming out of other major economies, most especially Federal Reserve President Ben Bernanke's testimony at 2:00 pm later.

[PipDiddy]

Zzzzzz... As expected, quiet trading on the Kiwi front, as the pair stayed within its daily range of 70 pips. The pair closed near its opening price, ending the day at 0.7110.

We could see more range like trading for the next couple of days, as no major data is coming out. Of course, given the recent consolidation, if there is any major news (ahem, Greece or Goldman Sachs anyone?) that could act as a catalyst, we could see big waves. So be careful!

[PipDiddy]

Ho hum, it was quite a lazy day for the NZDUSD as it rocked back and forth on the charts yesterday. The absence of any economic reports from New Zealand probably lulled the pair to sleep for the past few hours.

Only the visitor arrivals figure is due from New Zealand today and this report is slated to have a minimal impact on the Kiwi's price action. Still, let's not forget that tourism plays a huge role in New Zealand's economy and a rebound over the 1.9% decline seen in February could give the Kiwi an energy boost. Could the pair finally bust out of the 0.7080 to 0.7130 area today?

[PipDiddy]

The Kiwi traded flat again versus the greenback yesterday. Being in consolidation mode for a couple of days is usually a sign of a possible big movement soon. Given this, will we see a breakout in the NZDUSD pair today?

No economic reports were released in New Zealand yesterday. In the US, sentiment was bearish during the early part of the session when fears regarding Greece’s fiscal situation surfaced again. Investors, though, got its confidence in the market back when the US’s existing home sales posted a better-than-expected number of 5.35 million (vs. 5.28 million) in March. The mixed sentiment during the US session caused some of the major pairs like the NZDUSD to just trade in a range bound fashion.

New Zealand will not issue any major economic data today. The Kiwi, however, could experience some volatility with the publication of the UK’s first quarter GDP, Canada’s CPI and retail sales data, and the US’s durable goods orders and new home sales figures. Positive numbers from these accounts could spark some risk taking, benefiting the higher yielding currencies like the Kiwi.

[PipDiddy]

Thanks to the “positive” news that Greece decided to activate the €45 billion joint EU-IMF bailout package, the Kiwi was able to rally slightly higher against the greenback last Friday. The NZDUSD ended the week at 0.7163, up around 50 pips from its Asian session opening price that day.

No data coming out from New Zealand today, but do watch out for the Reserve Bank of New Zealand’s interest rate decision on Wednesday. Once again, the RBNZ is widely expected to keep true to its promise of keeping rates steady at 2.50%. Because of this, traders will probably be more focused on the accompanying statement to see whether or not the bank will start raising interest rates come the second half of 2010. If the RBNZ hints at any possible rate hike in the future, expect to see the Kiwi soar.

[PipDiddy]

Despite the lack of any news, the Kiwi posted some good gains versus the dollar, with the NZDUSD rising over 50 pips in yesterdays trading. Could traders be pricing in hawkish comments by the RBNZ in tomorrow’s interest rate statement?

After ranging the past week or so, the Kiwi has managed to gain some momentum, as it has risen the past two trading days. It’s possible that traders may be positioning themselves ahead of the RBNZ statement which will be released tomorrow at 3:00 am GMT.

However, in Forex Gump’s latest write-up, he points out that recent data doesn’t support a hawkish stance by the RBNZ. Is the bank suddenly going to turn more optimistic? We shall have to wait and see!

[PipDiddy]

Risk aversion clipped the Kiwi's wings yesterday, causing the NZDUSD to drop by more than a hundred pips, from the 0.7210 area to the 0.7100 handle, in just a couple of hours. Ouch!

New Zealand didn't release any economic reports yesterday, which was probably why the Kiwi was left vulnerable when investors started fleeing to the safe-havens. New problems in the Greek bailout process sparked this run of risk aversion and it didn't help that traders were also being extra cautious ahead of the RBNZ statement today.

Speaking of today's rate statement, our resident economic hotshot Forex Gump has just discussed a few interesting scenarios in his recent entry. Go ahead, check it out and figure out whether the central bank will be a hawk or a dove this time!

Aside from that, the Fed will also be releasing their own rate statement today. Would we see another round of risk aversion if the Fed sticks to its cautious tone? I have a hunch that these rate statements from the RBNZ and the Fed will be pit against each other in order to determine the direction of the NZDUSD. Who's gonna be the more hawkish one? Stay tuned at 6:15 pm GMT for the Fed's statement and at 9:00 pm GMT for the RBNZ decision.