Daily Economic Commentary: New Zealand

[ForexGump]

The Kiwi staged a major 150-pip fall against the greenback as traders took profit for the week last Friday. However, looking at how the dollar has been sold off furiously throughout the week, the move downwards was most likely a correction than the start of the new trend.

This week lacks any major economic data as only the Visitor Arrivals and Credit Card spending reports are due. These reports are pretty much outside the economic data radar of currency traders so event risk is most likely low. In any case, the Visitor Arrivals for September is due on Tuesday at 9:00 pm GMT while the result on credit card spending for the same month is due at 2:00 am GMT on Wednesday.

[ForexGump]

After dropping like a brick to end last week, the Kiwi had a comeback Monday! The NZDUSD pair zoomed away and set - once again - closed at a new yearly high at 0.7567.

Not much high impact news coming out over the next couple days, with only the visitor arrivals report due at 9:45 pm GMT tonight and credit card spending data tomorrow at 2:00 am GMT. I'd be on the lookout for more news regarding commodity trading as something that could move the NZD.

With an interest rate decision coming up next week, could traders be gearing up for a potential rate hike by the Reserve Bank of New Zealand? If so, we may see the NZD keep trekking higher...

[ForexGump]

After sprinting to an intraday high of 0.7576, the NZDUSD lost steam and tumbled to a low of 0.7442. New Zealand's economic calendar was free from high-impact reports as economic releases from the US directed most of the NZDUSD price action yesterday.

Weak PPI and housing data numbers from the US caused investors to doubt the strength of an economic recovery. As a result, the USD surged as risk aversion heightened, causing the NZDUSD to take a quick break from its recent rallies.

Data on visitor arrivals was the only report on New Zealand's docket yesterday. This report posted a large gain as visitor arrivals rose by 3.8% in September. Last August, visitor arrivals were down by 0.5%. However, this report didn't have much of an impact on the NZDUSD movement.

For today, another low-impact report is on schedule. Data on credit card spending is due 2:00 am GMT. After dropping by more than 2% in June and July, credit card spending rose by 0.1% in August. Overall spending probably increased in September, given that consumers are feeling more confident with their economic outlook and financial standing, and this could pump up credit card spending as well.

Today's US economic schedule is devoid of any high-impact reports as well but with several earnings reports due, risk sentiment could be the major factor in determining price action. Would the NZDUSD resume its rally once risk tolerance kicks in? We'll find out soon enough! Good luck fellow traders!

[ForexGump]

Up it went. Similar to the other “high yielders,” the Kiwi staged another strong performance yesterday as it marked a new yearly high yet again. The NZDUSD pair climbed to a new high of 0.7635 before closing at 0.7576. Will today be another green candle? Let us see…

No market moving events happened in New Zealand yesterday. During the US session, positive earnings from two notable financial firms Morgan Stanley and US Bancorp have kept buying interests on the high yielding currencies kicking.

New Zealand will be report-free today as well. In the US, unemployment claims for the week ending October 17 will be published. Initial claims are expected to reach 516,000 after the previous week’s 514,000 tally. Better-than-expected results could spark another risk appetite rally which in turn could benefit the NZD.

[ForexGump]

The Kiwi, like most major currencies, fell initially during the Asian session when risk appetite faded but gussied up and rallied during the US session. It closed at 0.7590, just ten pips higher from its Asian opening price.

No economic data due today but next week will be big for the Kiwi as the Reserve Bank of New Zealand will be announcing its decision on the country’s interest rates. With the Reserve Bank of Australia first to hike rates among the G20 nations, will we see the RBNZ follow suit?

Let me say just one more thing... For the last two Fridays, we saw how the Kiwi fell as investors took profit from its rally. It might be good to keep this in mind while trading today!

[ForexGump]

Make it three in a row! For the third consecutive Friday, the Kiwi fell, leaving the NZDUSD pair to close the week at 0.7541.

The kiwi fell as the risk aversion (and possible profit taking) took over during Friday's session as US equities fell. Could we be in line for a dip after the strong bullish run by the kiwi this month?

Nothing on deck today from New Zealand, or from other countries for that matter. We could see more range trading take place before things heat up later this week when the Reserve Bank of New Zealand releases its interest rate decision this Wednesday.

Recently, the Reserve Bank of Australia decided to hike interest rates. Will NBNZ bankers follow their lead, or will they be cautious and keep the rate at 2.50%? In any case, mark this down on your calender and be ready for some big splashes in the market!

[ForexGump]

The USD dominated over the major currencies yesterday, pushing the NZDUSD below the 0.7500 handle. No economic reports were released from New Zealand but the weak PPI data could have dragged the NZDUSD lower.

Australian producer prices increased less than expected as the strengthening AUD weighed down on import costs. Since the NZD has been appreciating in lockstep with the AUD, traders became worried that New Zealand's economy will experience the same downward pressure on inflation.

Also cautioning against the strength of the NZD was New Zealand Prime Minister John Key who said that their economy would be able to grow faster without the strong rallies of their local currency. However, he mentioned that their country does not have the option to "engineer a lower exchange rate", thus easing traders fears of currency intervention.

New Zealand's economic schedule is empty for today but the NZDUSD's movement could be largely affected by data from the US. CB consumer confidence and S&P house price index are due today and both are expected to post improvements from their prior readings. Maybe this could bring risk appetite back in the markets and push the NZDUSD higher. We'll see...

[ForexGump]

Investors snobbed the Kiwi’s 2.5% charm as they remain tentative in the global capitals markets. The NZDUSD pair fell to a low of 0.7415 before closing at 0.7442.

No economic reports were due in New Zealand yesterday. Though, the drop in the US’s CB consumer confidence index placed more downward pressure on the higher yielding currencies such as the NZD. The index surprisingly dropped to 47.7 from 53.4. Such drop led investors to favor the dollar again over the “cooler but riskier” assets.

Today, the National Bank of New Zealand will publish its latest business confidence index. The index logged in a score of 49.1 in September. A considerable increase in the figure could increase the probability that the RBNZ would hike its interest rate. However, the bank is widely expected to leave its interest rate unchanged at 2.5%. Still, some economists are speculating otherwise given the RBA’s recent hike. Will the RBNZ follow the RBA? We’ll find out today at 8:00 pm GMT.

And oh.. a hike in the rates would propel the Kiwi higher. So you better keep at least an eye on it.

[ForexGump]

The NZD/USD pair took a major dive yesterday as Reserve Bank of New Zealand Governor Alan Bollard reiterated the bank’s commitment to keep rates steady well into 2010. The pair is currently trading just a few pips below 0.7200, right back to where it opened this month.

According to him, there is no urgency to change the bank’s accommodative stance with regards to monetary policy. The economy is still weak and far from its pre-recessionary state. It seems that the bank wants to make sure that recovery is certain before raising interest rates. Given this, will the NZD/USD be able to keep its status as the best-performing major currency pair in the foreign exchange market this year?

New Zealand’s trade balance released yesterday also mirrored this as it showed that imports slumped for the sixth straight month this September. The trade balance, which measures the net difference in value between imported and exported goods, printed -420 million, lower than the -675 million expected. The drop in imports was primarily led by the decline in demand for cars and computers.

Tonight, expect to see the report on Building Consents at 9:45 pm GMT. The report, which measures the increase (or decrease) of new building approvals month-on-month, is usually used by investors and traders as a leading indicator of future construction. Economists consider this essential as an increase in construction activity tends help labor market and therefore, consumer spending in the long run.

[ForexGump]

The Kiwi let out a sigh of relief, as they were able to avoid another day of losses in yesterdays trading. The NZD got a nice boost from risk appetite and the NZDUSD finished the day at 0.7328.

New Zealand building consents rose by 3.3% in September, marking the 5th time in 6 months that approvals rose. Some expect that this figure will continue to rise, as RBNZ decided this week not to raise their interest rates. The fellas over at the RBNZ decided to keep rates low in order to help stimulate the economy further, as they still feel that it needs more boosting.

No news coming out today from New Zealand, so be on the lookout for data that could be catalysts for shifts in sentiment. Yesterday, we saw risk appetite rise as a report showed that the US economy grew by 3.5% in the past quarter. With it being a Friday, it will be interesting to see what will happen – will risk aversion reign like it did most of the week, or will sentiment from yesterday carry over? Watch out and good luck trading!