Daily Economic Commentary: New Zealand

Surf’s up my friend! The Kiwi swam higher in yesterday’s trading session, benefitting from an increase in risk appetite, which let the NZDUSD close 60 pips higher from its opening price. Good way to start off the week eh?

According to a report released late yesterday, labor costs rose by 0.3% in the past quarter, which was just slightly off initial forecasts of a 0.4% rise. Still, this didn’t deter Kiwi bulls from pushing the NZD higher. Remember, rising labor costs are a leading indicator of inflation because firms normally pass on these costs to consumers. I’m going to be keeping an eye out on inflation figures from New Zealand – it may just signal future rate hikes by the RBNZ.

Watch out for the RBA interest rate decision due today at 4:30 am GMT. If the bank decides to hike rates yet again, could this give more incentive for the RBNZ to hike their own rate?

Jay Sean’s “Down” was on loop on the Kiwi’s iPod all day yesterday as the NZDUSD fell down down down down down to the 0.7200 level. Risk aversion, spurred by never-ending fears of a debt contagion, caused stocks and commodities to tumble.

New Zealand didn’t release any economic reports yesterday, leaving the Kiwi even more vulnerable to shifts in risk sentiment. Their employment change and unemployment rate are set for release today and strong figures could provide some relief for the Kiwi. For the first quarter of 2010, a 0.3% rebound in employment is expected. If the actual figure meets or beats expectations, it would mark New Zealand’s first quarterly increase in employment in over a year. This could also keep their unemployment rate steady at 7.3%. Watch out for the actual results at 10:45 pm GMT.

Is it a bird? Is it a plane? No, it’s the Kiwi soaring on some good ol’ positive data! Earlier today, the NZDUSD jumped more than 100 pips when employment reports from New Zealand beat expectations by a large margin.

The quarterly employment change revealed that there was a 1.0% rise in the number of employed people during the first quarter of this year, better than the 0.3% increase initially expected. This brought joblessness in New Zealand covering the same period down to 6.0% from 7.1%. Given this strong employment data and with the Reserve Bank of New Zealand’s commitment to keep rates at 2.50% coming to an end in July, it looks like currency traders are starting to price in their expectations for a future rate hike!

Still, this could only serve as a chance for the bears to sell the Kiwi at more expensive levels since risk aversion stemming from euro zone debt problems remains pretty strong. I guess we’ll just have to see what the RBNZ will say about all this rate hike speculation shenanigans!

No data coming out of New Zealand today so the Kiwi’s price action would most likely be driven by news coming out of other major economies, most especially the US initial jobless claims later.

After starting the day on the right foot, the Kiwi tripped and fell as the dollar rose across the board. After trading as high as 0.7277, the NZDUSD pair fell 250 pips in intraday trading, finally ending at 0.7108. Tough luck!

In all fairness, the huge drop had nothing to do with Kiwi news. Across the Pacific, some wild swings in volatility due to some trading errors spurred drops in the US equity markets, which led to wide-spread rallies in both the dollar and yen.

Once again, we don’t have anything coming out from New Zealand today, but taking a look at yesterday, we can see that it is really risk sentiment that is driving the markets. Watch out for news coming out from the euro zone, as any news regarding the Greek bailout package may cause another spike in volatility. Also, keep an eye out for the US NFP report, which in the past has normally garnered a lot of attention.

Of course, given what the markets have been focusing on this past and what happened yesterday, it may not cause too much of a ripple. Nevertheless, make sure you have those risk management rules in check! Better yet, you may wanna stay out of the markets to avoid any whipsaws!

The Kiwi flew all over the place last Friday as the NZDUSD zigzagged its way across the charts. At the end of the day, the Kiwi landed above the 0.7100 handle and closed at 0.7136 against the greenback.

  Although New Zealand didn’t release any economic reports at the end  of last week, the Kiwi was able to cap off a week’s worth of declines  and recover some of its losses. However, commodity prices were still  down during the day, suggesting that further weakness among the  com-dolls could be in the cards. 

  While news on the Greek bailout and other [euro zone](http://www.babypips.com/forexpedia/Eurozone) debt troubles  could continue to dominate the airwaves, let’s not forget about the  economic catalysts for this week. In New Zealand, the main economic  event would be the release of its retail sales report on Thursday 10:45  pm GMT. The report could print a 1.2% rise in  March [retail sales](http://www.babypips.com/forexpedia/Retail_Sales), which would be a considerable rebound over the 0.6%  decline seen in February. The core version of the report is slated to  post a 1.5% increase, up from the 0.9% drop previously reported. 

  Well… That’s about it! No other top-tier report are on deck but it  might be helpful to check out the release of New Zealand’s  manufacturing index on Wednesday. Although this report would most likely  have a very minimal effect on the Kiwi’s movement, it could give a good  idea about the outlook for the manufacturing industry of the country.  Also due on Wednesday is the food price index, which is sometimes  considered a leading indicator for consumer [inflation](http://www.babypips.com/forexpedia/Inflation). 

  Since the Kiwi has barely any economic figures to draw strength  from, it could be very vulnerable to sudden swings in risk sentiment  once again. With that said, stay tuned for any updates on the euro zone  debt situation!

The Kiwi turned out to be another beneficiary of yesterday’s risk appetite run. The NZDUSD gapped up to open the week at 0.7197, climbing to a high of 0.7297, before eventually ending the US trading session 0.7227.

With the Reserve Bank of New Zealand’s commitment to keep rates at 2.50% expiring on July, could we see currency traders start buying up the Kiwi with the wind on their backs? For now, the fundamental picture looks hazy, but with the 200 simple moving average on the daily of the NZDUSD holding on as support, it looks like traders remain bullish on the pair.

Once again, New Zealand’s economic calendar will be completely barren today. This means that the Kiwi would most likely get its direction from news coming out of other major economies, particularly Australia, Canada and the US.

It looks like the Kiwi bulls took the day off, as the NZDUSD quietly edged lower and lower during yesterdays trading session. The pair closed about 55 pips lower on the day, to end at 0.7171.

We may be in for another snoozer today, as nothing is scheduled for release from New Zealand. Still, I suggest you watch out for news coming out of the euro zone as a potential catalyst for big waves in the currency markets. With all the uncertainty surrounding the euro zone and the recent bailout package being provided by the EU and IMF, any bad news could cause traders to unload their EURs, and seek safety in the USD. This could lead to a strong dollar rally across the board, with com-dolls like the Kiwi taking a hit.

The Kiwi was off to a strong start yesterday as it initially raced for gains against the greenback. However, its rally was short-lived since it took a U-turn upon reaching the 0.7200 mark.

Only a couple of low-key reports were released from New Zealand yesterday. These were the Business NZ manufacturing index and the food price index. New Zealand’s manufacturing industry expanded again in May, judging from the manufacturing index which rose from 56.7 to 58.9 during the month. This marks the indicator’s third consecutive monthly increase, implying that the manufacturing sector is getting back on its feet. Meanwhile, the food price index, which is sometimes considered a leading indicator of consumer inflation, logged in a 0.5% dip for April.

Today would probably be a much more exciting day for the Kiwi since New Zealand’s retail sales figures are on deck. After sliding down by 0.6 in March, retail sales are expected to bounce back by 1.2% in April. Core retail sales are also expected to rebound by 1.5% from the 0.9% drop seen in March. Watch out for the actual results at 10:45 pm GMT!

Positive data on Australia’s employment report helped the Kiwi post some minor gains yesterday. By the end of the US trading session, the NZDUSD traded at 0.7148, up 20 pips from its Asian session price.

Early on today, however, the Kiwi found itself dropping lower across the board. New Zealand’s retail sales in March, which was initially expected to climb by 1.1%, showed a mere 0.5% increase only. Meanwhile, the retail sales report that excluded automobile sales revealed a 1.1% rise, which was also below forecast.

No more data left on New Zealand’s economic cupboard for the rest of the week, so the NZDUSD’s price action would most likely be directed by risk aversion/appetite flows and data coming out of the US. Keep an eye out for that 0.7100 psychological support level folks, as a break in that level could push the NZDUSD back to the previous week’s low.

Once again, the Kiwi dropped as dollar bulls took over the markets last Friday. Still, looking at today’s chart art, it looks as if the pair is merely staying within a rising channel. Will support continue to hold this week?

Later today, quarterly producer price index figures will be available tonight at 10:45 pm GMT. The report measures the change in prices that producers pay for their raw materials. It is a measure of inflation because companies normally pass on these costs to consumers to bear the burden. Thus, rising input prices normally lead to an increase of the price of the final product. Input prices are expected to have risen by 0.5% during the first quarter of 2010, which would be a slight improvement over the previous quarter’s increase of 0.3%.

I point this out because there has been speculation that the RBNZ may actually decide to hike interest rates soon. This speculation however, was somewhat muted when retail sales data came in disappointing last week. If today’s report indicates that inflation is still subdued, it may give less incentive for the central bank to hike interest rates, as it would suggest that the economy isn’t improving as much as they would like.

The Kiwi was unable to take flight yesterday as it crashed below the psychological 0.7000 level against the greenback. Risk aversion, spurred by the usual fears of a debt contagion, and the slide in oil prices dragged the Kiwi down.

Yesterday, New Zealand released its services index, which revealed that the services sector expanded for the sixth straight month in April. However, the reading fell a few notches from 56.7 to 54.1, signaling that the pace of expansion slowed.

Also released yesterday was New Zealand’s producer price index which posted a 1.3% increase in input prices and a 1.8% rise in output prices for the first quarter of 2010. Both figures outpaced the consensus of a mere 0.5% increase in input and output prices, suggesting that the pickup in economic activity kept inflation rising at a strong pace. These better than expected figures provided a bit of support for the Kiwi, which was able to bounce from a low of 0.6917.

Later today, New Zealand will release the RBNZ Financial Stability Report at 9:00 pm GMT. This report would contain the central bank’s view of inflation, growth, and other economic conditions that will affect interest rates in the future. Hawkish remarks could help the Kiwi pull up from yesterday’s drop.

For the third consecutive day, the Kiwi bowed down to dollar’s unyielding strength. The strong case of risk aversion pushed the Kiwi down to 0.6862 by the end of the US trading session, almost 90 pips lower from its opening price during the Asian session.

The Kiwi took another hit earlier today when Reserve Bank of New Zealand’s financial stability report revealed that the country’s economy remains particularly fragile. Although the overall economic outlook has improved, the RBNZ indicated that the sovereign debt concerns facing some euro zone nations could indirectly affect global recovery. Traders saw the report as bearish for the Kiwi, as the fragility of the ongoing economic recovery could force the RBNZ to sit on their hands once again on its next interest rate decision.

No data on New Zealand’s economic plate today, but we will see New Zealand’s annual budget release at 2:00 am GMT tomorrow. The release details how the government plans to spend its budget for the year. This is important for traders because government spending accounts for a significant chunk of the country’s GDP.

Did someone just hire a mercenary to take out the com-dolls!? The NZDUSD was part of the big com-doll hit yesterday, as it dropped another 90 pips to end the day at 0.6621.

Similar to the moves seen in the AUD and CAD, the Kiwi has been caught up in round after round of broad based commodity selling. Debt contagion fears have sparked risk aversion, which has also led to traders shifting their positions away from higher yielding currencies like the NZD.

Still, the Kiwi’s losses weren’t as severed as those of its com-doll brothers. It found some support when the government’s budget balance plan was released. According to the plan, the Kiwi government will raise sales tax from 12.5% to 15%, while cutting income taxes. This would hopefully cut the government’s debt to GDP ratio of 90%, allowing the country to post a surplus by 2016.

I can see why traders saw this as goods news for New Zealand – governments around the world are busting their butts to fix their budget s to avoid a sovereign debt crisis that are breaking out like pimples on the euro zone’s face.

No data is coming out from New Zealand today, but that doesn’t mean you can rest on your heels. Make sure you got your dance shoes on, as we may see some large swings to end the week!

Similar to its com-doll brothers, the NZDUSD bounced back in Friday’s trading session after a series of losses to begin the week. The pair closed at 0.6783, after hitting as low as 0.6682 last week. Was the rebound merely a case of some profit taking that took place?

Thanks to a return of risk appetite, the Kiwi was able to get receive some much needed relief. My only question is, have we seen a bottom or will risk aversion continue to push higher yielding currencies lower ?

Tomorrow at 3:00 am GMT, we could see some volatile moves when the quarterly inflation expectations report comes out. Traders will be looking out for this report, as it could signal what direction the RBNZ will take with regards to interest rates. If there are signs that inflation is rising, could this given reason for the central bank to raise rates sooner rather than later? In any case, make sure you have your forex seat belts on cause we might be in for a wild ride!

Monday wasn’t such a hectic day for the NZDUSD as it cruised idly above the 0.6700 handle. With most traders off on a holiday and with not much economic catalysts on deck, the Kiwi was able to hold on to its recent gains.

Today, New Zealand is set to release a report on inflation expectations for the quarter. Last time, the report showed that business managers expected annual inflation to reach 2.7% for the next couple of years. Note that inflation expectations have been rising for the past four quarters, suggesting that a higher figure could be seen this time around. If this happens, expectations of an interest rate hike from the RBNZ could also increase, which would be bullish for the Kiwi. Watch out for this report at 3:00 am GMT.

The NZDUSD found itself holding on to the short end of the stick yesterday. The pair ended the day at 0.6681, almost 40 pips lower from its Asian session price.

The lack of hard-hitting economic data put the NZDUSD at the mercy of risk aversion yesterday. This time, debt concerns stemmed from Spain… Apparently, a couple of its local banks were forced to band together and merge to soften the blow of falling revenues.

No data coming out again today from New Zealand, so the NZDUSD’s price action will most likely be driven by economic data from the US, particularly the reports on durable goods orders and new home sales.

With not much big moves yesterday, the NZDUSD kept within its range and channeled lower. At the end of the day, the pair closed slightly lower at 0.6632. Will we continue to see the pair channel lower?

With summer coming up, we may continue to see similar movement in the forex markets, especially in pairs like the NZDUSD, which isn’t as volatile as some of the other majors. In any case, look out for any big news coming out from other developments around the world, like in Korea and in the euro zone. Any surprise news may cause sentiment to shift quickly, which may lead to some strong moves in the NZDUSD.

“Whee!” yelled the Kiwi as it soared higher and higher against the greenback yesterday, propelled by an improvement in risk sentiment. New Zealand’s stronger than expected trade balance figures even gave the Kiwi an additional boost.

New Zealand’s trade surplus grew from 590 million NZD to 656 million NZD in April, allowing its annual trade balance to turn positive for the first time since 2002. April’s trade balance figure beat the consensus of 455 million NZD as exports grew strongly that month.

No other economic reports are due from New Zealand today so keep your eyes and ears open for other events that could impact risk sentiment and affect the Kiwi’s movement.

The Kiwi went on a roller-coaster ride against its US counterpart last week. Market volatility sent the NZDUSD plunging down to the week’s low at 0.6562 before skyrocketing to close the week at 0.6789.

As we saw in the Kiwi’s movement last week, shifts in risk sentiment has been the main driver of the FX market as of late. The Kiwi rose on increased risk appetite last Thursday, but dropped on Friday as commodities and equities took a small hit.

Earlier today, the NBNZ business confidence survey was released. The report, which measures how confident manufacturers, builders, service providers and retailers are about the state of the economy, printed a reading of 48.2, slightly lower than the previous month’s score of 49.5. Could this be an adverse effect of recent debt contagion fears?

The Kiwis may be confident, but the skittish market need more convincing as the Kiwi finished slightly lower against the dollar and the yen at 0.6767 and 61.77 respectively despite companies being at their highest spirits since May 1999.

Here’s a little more in depth look at the the New Zealand Business Confidence survey released yesterday. The report revealed that 48.2% of the companies expect the general economy to improve, down from the previous 49.5% figure. The overall figure might be a bit of a disappointment, but the survey also showed 45.3% of companies are more confident on their sales and profits, marking the highest percentage in 11 years. This could mean more investments and employment for the economy, creating a pressure for the interest rate to rise.

The Reserve Bank of New Zealand is scheduled to release their monetary policy statement on June 10. Analysts expect the rate to rise by 25 basis points. Will the bank give in to the pressure? We’ll know next week! Meanwhile, let’s watch for the Australia and New Zealand Commodity Prices is published tomorrow at 3:00 am GMT. Since exports make up a significant chunk of New Zealand’s economy, an increase in export prices could indicate rising export demand, which would be good for the economy.