Daily Economic Commentary: New Zealand

The NZDUSD proved to be one of the better performers yesterday. From its weekly open of .7339, the pair climbed steadily all through the day, topping out at .7400. The rally looks like it could go further, but please do watch out the previous week high at .7442 as this is a major area of interest.

No important economic data was released yesterday but we will see New Zealand’s measure of inflation, the consumer price index (CPI), at 9:45 pm GMT today. Unlike most CPI reports from other major economies, New Zealand’s CPI is measured on a quarterly basis. The expectation is a 0.0% reading for the final quarter of last year, down from the 1.3% seen during the third quarter.

A rising CPI is traditionally seen as bullish for the domestic currency because it could lead for the country’s central bank to hike rates in the future. With that said, a better-than-expected actual results could give currency traders another chance to buy up the NZDUSD.

The Kiwi was able to withstand the USD’s might and stood its ground in yesterdays rumble. The Kiwi bulls kept the NZDUSD afloat to finish near its opening at 0.7393.

The Kiwi recovered despite pressure from both a USD rally, as well as a report indicating that consumer prices fell during the 4th quarter of 2009. The consumer price index revealed that prices fell by 0.2% during the past quarter. This suggests that the RBNZ may not follow the RBA’s lead in hiking rates earlier than expected.

I suspect we could get a better idea if the RBNZ will hike rates or not when retail sales data comes out tonight at 9:45 pm GMT. Retail sales are expected to have risen by 0.6% in December. This should come as no surprise, since it was the holiday season. Still, if this figure comes out worse than expected, the RBNZ may see it as a sign that may pause in their decision to raise interest rates sooner than expected.

It seems like the Kiwi got its wings clipped yesterday as it plummeted by more than 200 pips against the greenback! The Kiwi, along with its com-doll buddies, came under heavy selling pressure after China announced that it would tighten its lending.

Since the Kiwi was still unsteady after seeing weaker than expected CPI figures, it easily gave way when news of China’s tighter lending policy broke out. China seems to be uneasy with rising inflation so they probably want to start being less liberal with their bank lending. This could cause local demand to slow down, dampening growth of their major trade partners.

Still, the Kiwi was able to pull out of its dive as stronger than expected retail sales figures came out. November retail sales grew by 0.8%, outpacing the 0.6% expected increase. Core retail sales also climbed by 0.8%, much higher than the estimated 0.3% rise. This increases the chances of a sooner rate hike as improving consumer confidence, higher immigration, and a stronger housing market prop up New Zealand’s economy.

New Zealand won’t be releasing any economic reports in the next 24 hours but keep an eye out for China’s boatload of economic releases. China is expected to report its GDP, industrial production, CPI, fixed asset investment, and retail sales at 2:00 am GMT today. Whew! If the Asian giant posts 10.7% quarterly growth as expected, we might see the commodity-based currencies recover from yesterday’s slide.

The Kiwi continued to slide versus the dollar and the yen during yesterday’s market exchange. The NZDUSD fell and closed at 0.7120 from an opening of 0.7198. The NZDJPY also decline to 64.36 from 65.66.

Reports that china will once again try to remove some of the excess liquidity in their financial system led to a massive asset sell-off yesterday. Equities and the higher yielding currencies were all down as a result.

No economic reports are due today in New Zealand. The Kiwi could just trade in a range bound fashion today given the lack of economic flows in New Zealand and the US.

Thanks to the absence of any major economic data, the Kiwi was able catch its breath last Friday. The Kiwi was hardly changed, closing the week at 0.7106, just a few pips lower from its Asian open price that day of 0.7120.

For this week, the focus on Kiwi traders will be the RBNZ’s interest rate decision on Wednesday. Given the RBNZ’s commitment to keep rates steady until mid-2010, I suspect there would be no change in the country’s benchmark interest rate. I’d keep a close watch on the accompanying statement though, as any hint that they would extend their commitment to keep rates steady could cause some massive Kiwi selling…

On Nov. 29, Thursday, we’ll also see December’s building consents report at 9:45 pm GMT. A rising building consents report is usually seen as bullish for the Kiwi as it signals that economic activity could soon pick-up. Consents rose 1.2% in November, making the sixth consecutive increase. Another increase in December could provide some support for the dying Kiwi.

The Kiwi held its ground in yesterday’s slow trading session as the NZDUSD pair finished trading slightly higher at 0.7143. Looks like traders are gearing up for the big news coming up over the next few days…

The news I’m referring to of course, is whether or not Ben Bernanke will be reappointed as Fed chairman or not. As my friend Forex Gump said in his blog, it could have a significant effect on risk sentiment going forward. Given how the markets have reacted the past couple of weeks, a surprise result could cause quite a ruckus in the markets.

Also, don’t forget that the RBNZ will be releasing its interest rate decision tomorrow. Chances are that they there won’t be a rate hike, but I advise that you stay tuned and listen to the accompanying statement. It may just include hints as to when exactly the RBNZ plans to hike interest rates.

The Kiwi fell victim to greenback strength yesterday as risk aversion made a comeback in the markets. Commodity prices fell sharply, pushing the NZDUSD below the 0.7100 handle.

Only the credit card spending report, which posted a 1.8% annualized increase in December, was released from New Zealand in the past 24 hours. On a month-over-month basis, December consumer spending was down by 1.3% from November, marking its first decline in three months. Hmm, I find this weird considering how spending usually picks up during the December holidays…

Anyway, moving on to today’s economic agenda… The RBNZ will release their official rate statement at 8:00 pm GMT today. Would New Zealand’s central bank finally hike rates just like their Oceanic buddy Australia? RBNZ Governor Bollard seems to be committed to keeping rates at their current levels, at least until mid-2010. But Forex Gump has a really interesting take on this and you should check it out here!

In the meantime, keep an eye out for the US FOMC statement also due today. Watch out for possibly sentiment-shifting comments from Fed officials!

The Kiwi slid for a second time in a row versus the dollar yesterday. The NZDUSD fell and closed at 0.7053 from 0.7077.

Earlier today, the RBNZ decided to leave its interest rate unchanged at 2.5%. According to RBNZ Governor Alan Bollard, New Zealand’s present economic standing is still consistent with the central’s projections back in December. While the improvement in the global economy, particularly in China and Australia, is boosting New Zealand’s economic activity, sustained growth among New Zealand’s trading partners remains unsure. Also, the -0.2% 4Q CPI figure lifted some pressure off the central bank to raise its rate.

Later (9:45 pm GMT), data on New Zealand’s trade balance will be reported. The country’s trade deficit is seen to have improved to –NZ$115 million in December from –NZ$269 million. Building consents for the same period is also projected to rise by 3.0% on top of the previous month’s 1.2% gain. The anticipated improvements on these two accounts could give the Kiwi a much needed support.

Just when you thought the Kiwi was going to make a nice rally, risk aversion came swinging, pushing the currency right back to support at the 0.7030 region.

Data released earlier today failed to provide any support for the Kiwi. The building consents report showed that new building approvals fell 2.4% in December, marking the first drop since July 2009. The 1.2% increase in November was also revised down to 0.1% only.

The trade balance was also terrible. It showed that imports fell by a whopping 18.6% in December, causing the trade balance to show a 2 million NZ$ surplus instead of the 115 million NZ$ deficit initially expected. Take note that the trade balance measures the net difference in the value of exported and imported goods.

No reports from New Zealand coming out for the rest of the day though so keep a close eye on the Advance GDP report from the US tonight. A better-than-expected reading could give traders more reason to sell the Kiwi.

The Kiwi trickled lower against the USD on Friday, as the dollar has continued its dominating performance against all other higher yielding currencies. With the NZDUSD pair reaching its December lows, will the NZD find any support?

Tonight, at 9:45 pm GMT, the quarterly Labor Cost Index will be available. It is expected to show that labor costs rose by 0.5% in the past quarter. Take note that this report is also a measure of inflation as additional costs incurred by the company are normally passed on to consumers. Now, if labor costs are rising, could this mean that inflation is rising as well? And if inflation is rising, does this give the RBNZ some room to hike rates sooner rather than later? Maybe, just maybe. Only time will tell.

Later in the week, the unemployment rate will be release is expected to have increased to 6.8% in the past quarter, up from 6.5% in the third quarter. After growing 1.0% and 0.5% in the previous two quarters, this could indicate that job losses are peaking and that labor conditions are improving, although at a very slow pace. If this figure comes in much better than expected, it could help the Kiwi recoup some of the losses its made in the past week.

The Kiwi soared higher yesterday despite the lack of high-impact reports from New Zealand. The improvement in risk appetite and the reported uptick in commodity prices pushed the Kiwi and its com-doll buddies higher.

According to the report from Australia and New Zealand Banking Group, commodity prices climbed by 0.4% in January. This was definitely good news for New Zealand since its economy depends largely on commodities and exports.

Another likely factor that drove the Kiwi higher was the upcoming RBA rate statement. Australia’s central bank is expected to hike rates another 25 basis points to 4% 3:30 am GMT today. If the RBA fails to deliver, disappointment for the Australian economy could affect the price action of the Kiwi as well. No economic reports are due from New Zealand today.

The Kiwi managed to pocket some gains over the dollar despite the lack of economic flows in New Zealand in yesterday. The Kiwi initially fell when the RBA surprised the markets by not hiking their interest rate. Nonetheless, traders continued to buy the NZDUSD for the rest of the session.

New Zealand’s employment change and unemployment rate for the fourth quarter of 2009 are due later at 9:45 pm GMT. The number of employees that firms have absorbed during the quarter is expected to have decline by 0.1% on top of the 0.8% drop during the previous period. This decline in employment change is expected to have caused the country’s jobless rate to worsen to 6.8% from 6.5%. These weak employment numbers do not reflect positively on New Zealand’s economy. Such could therefore be bearish for the NZD.

Ouch. It looks like the Kiwi’s going to receive a lot of hatin’ today as New Zealand’s economic situation report released earlier today came out grossly below expectations. The Kiwi has now sunk below 0.7000, its lowest level in four months.

The employment situation report showed that unemployment during the final quarter of 2009 edged up to 7.3%, significantly higher than both the consensus (6.8%) and the unemployment rate the previous quareter (6.5%). It seems that currency traders took this as a sign that the RBNZ will stay true to its commitment of keeping rates unchanged until mid-2010.

No economic data coming out of New Zealand for the rest of the week so the Kiwi’s price action would most likely be driven by data from other global economies, most especially the upcoming US NFP report on Friday.

The Kiwi bulls we’re put to sleep yesterday, as the NZDUSD was slaughtered throughout all trading sessions. The pair fell by 200 pips from its opening and is now trading at 0.6875. Is there no end in sight?

Risk aversion was the major theme in yesterdays trading match, as everybody wanted a piece of the dollar or yen. This left higher yielding currencies like the NZD in the dust. With no major economic news coming out from New Zealand today, watch out for degrees in risk sentiment as this has been driving the markets as of late.

After staying range-bound prior to the US session, he NZDUSD had a hit-and-run with the 0.6800 area last Friday after the US employment report came short of consensus. New Zealand did not release any economic reports on that day.

This week, the top-tier report due from New Zealand is its retail sales report. Set for release on Thursday, the report could show that retail sales climbed by 0.7% in December, following a 0.8% increase in November. Its core retail sales could print 0.3% growth in December, which is lower than the previous month’s 0.8% rise. Watch out for the actual figure due 9:45 pm GMT.

Other reports due from New Zealand are the Business NZ manufacturing index and food price index to be released on Wednesday. These reports are slated to have minimal to no effect on the Kiwi’s movement.

The Kiwi slid again vis-à-vis the dollar yesterday. The NZDUSD has been taking a hit since the second week of January. It looks like that it’s gonna head further down since it already broke below the 0.7000 support.

No economic reports were held in New Zealand yesterday. The bearish sentiment on the markets, however, stayed and weighed on the higher yielding currencies like the Kiwi.

New Zealand’s economic calendar is report-free today as well. The Kiwi may consolidate for awhile today before it treks lower. Note that the bias remains to be to the downside given its present downtrend.

Improved risk sentiment from the bailout plan for Greece gave the Kiwi bulls a slight boost in yesterday’s trading session. After jumping in and out the 0.6900 handle, the Kiwi was finally able to breakout and finish off the US trading session 0.6963.

No important economic data due for release today but do expect to see New Zealand’s report on retail sales tomorrow at 9:45 pm GMT. Retail sales for December is predicted to have risen by 0.7%. Meanwhile, the core version of the report, which excludes vehicle sales, is expected to increase by 0.3%. If the actual results come out higher, we could see the Kiwi bust through that 0.7000 barrier.

The Kiwi remained steady yesterday as trading waves were weak. The NZDUSD stayed within a range of about 75 pips, with the pair closing lower at 0.6932 as a result of some USD strength midway through the US session.

Tonight, look out for some retail sales data due at 9:45 pm GMT. Retail sales are expected to have increased by 0.7% in December, while the core report, which doesn’t include automobile sales, is projected to have risen by 0.3%. This shouldn’t come as much of a surprise. After all, it was the holiday season.

The wave of risk aversion that came from Greece debt problems failed topple the New Zealand dollar yesterday. The NZDUSD found itself at 0.7014 by the end of the US trading session, covering a decent amount of ground from its Asian session price of 0.6932.

Earlier today, though, ugly results on December’s retail sales report helped the bears drown the Kiwi below the 0.7000 handle again. Instead of showing a 0.7% uptick, the report revealed the sales remained flat. Meanwhile, the core version of the report which excludes the sales of automobiles, dropped by a whopping 1.8%, indicating that consumer activity remains weak. The results also gave investors more reason to believe that the RBNZ would keep true to its commitment to keep rates steady until the third quarter of 2010.

No economic data due for today but do watch out for Germany GDP and the US retail sales report later. We all know how data from other major economies also affect the price action of the Kiwi.

The greenback’s charm worked on the Kiwi last Friday as evidenced in the NZDUSD’s dip. The pair wilted down to 0.6964 from 0.7009.

No economic reports were due in New Zealand last Friday. The bearish sentiment due to the dismal German 4Q GDP figure, however, also weighed on the Kiwi.

New Zealand’s 4Q PPI is will be on tap later at 9:45 pm GMT. Producer prices during the period are seen to have gained by 0.5% after dropping by 1.1% in the third. Though, we could be up for a negative surprise here given New Zealand’s flat retail output in December. Such would be bearish for the Kiwi.