Today we have data from New Zealand which should be important for the central bank – that is the consumer price index for the 4Q. The expectation for consumer prices is for a gain of 0.4% q/q which would match the reading we had in the 3Q. But it is more instructive to look at the annual rate as that is expected to cool considerably. We examine the implications for the AUD/NZD.
New Zealand releases its 3Q GDP data in Wednesday (12/21) session and the report could act to lift the New Zealand dollar as the expectations is for a nice bounce back to growth from a poor 2Q. The consensus forecast is for a 0.6% rise, compared to the tepid 0.1% seen in the 2Q thanks to extra consumption from the Rugby World Cup. We highlight the 3 key scenarios for the report and also examine the AUD/NZD which may be ready to switch trend in the daily time-frame.
We preview the 5 key themes for this week. 1) The continuing concern about Euro-zone downgrades and the pressure on the Euro. 2) US spending and durable goods data. 3) US housing releases. 4) Key data from New Zealand including GDP and current account. 5) Canada’s reports on inflation, sales, and GDP.
The RBNZ rate decision showed the central bank a bit more dovish as it dropped its language referring to rate hikes we saw in its previous statement. With inflation falling back into the bank’s target band and economic conditions globally pressuring the domestic economy, the RBNZ may have scrapped the idea of raising rates in the first half of 2012.
While the GBP/USD has gained in today session as a result of higher risk appetite and therefore broad dollar weakness, if we look at some other pound crosses including the GBP/AUD, EUR/GBP, GBP/NZD, GBP/CAD, and the GBP/CHF we see the pound on the back and of today’s sharp moves. Until the macro data improves in the UK we should continue to look for pound weakness against other higher-yielding currencies, even as the GBP/USD may maintain some upward momentum.
The Reserve Bank of New Zealand’s interest-rate decision today has been predetermined by the CPI data for the 3Q we saw earlier in the week. We should expect a rather bland, and not necessarily market moving statement from the central bank. Any surprises in the language from the RBNZ pointing to the possibility of an interest rate increase in the next few months would give the NZD strength.
Not a good day for New Zealand as its joined the ranks of Italy and the US in losing its AAA credit rating from S&P, following a downgrade by Fitch earlier. S&P cut their long-term foreign currency ratings to AA from AA+ and the local currency rating to AA+ from AAA, with stable outlooks. This rating downgrade likely means the NZ government will have to pay a higher borrowing cost as yields will climb on this announcement. If this credit rating cut also means the RBNZ will keep interest rates lower for longer, its overall a NZD negative.
Following the sharp declines in commodities and risk sentiment last week, we are seeing the NZD/USD entering a period of consolidation, in a counter-trend risk rally. While we have to keep our eye squarely on the developments from Europe, which are driving the general market, we do have a couple of key reports towards the end of the week – building permits and business confidence – that give us insight into the NZ economy and the expectation for interest rates.
The euro was softer overnight as the EU leaders continue to have disagreements on the Finland collateral issue, though we did have also economic finance ministers in the euro zone’s meeting in Poland with U.S. Treasury Secretary in attendance. In the pound, following a dip on central bank Bean’s comments, we saw the Pound rebound. George Osborne called for a clear signal from the EU politicians, and issued a warning to his countrymen that the euro zone problems can have a strong impact on the UK economy. The Australian dollar New Zealand dollar were higher against the dollar overnight as global equities held onto the positive gains we’ve had this week.
Inflation expectations easing slightly should be comfort for the RBNZ. The RBNZ woul dlike to see inflation expectations moderate over the coming year, and this was a step in that direction. While the RBNZ remains vigilant about sign of inflation building up in the economy, right now the concern is on the global economy and the recent downside risks that have come about, especially in August.
RT @MarvellousR8kie @alaidi Thank you very much for the valuable insights. Great seminar. Thks for coming ! #forex
A MUST For Anyone who Trades FX! Free e-book from BK -Don't Trade Like Tony Montana FX http://t.co/WTBAVCeZ .03
$GBPUSD 240-minute swing entry update video walk-thru http://t.co/Gd2ELB55 #forex $$ $GBPUSD Follows-Through as Greenback Slides Towards Psych Level http://t.co/wVNJGzNH #forex $$ Sandy kicking off the seminar, Ill take over at Noon http://t.co/xrZdNmNC #forex $SPX Pretty much replicated $EURUSD shorts on Thurs nite as on Tue; results were the same, peaks at 1.32 back to hit 13080s targets #forex
Thank you kindly! Have a great weekend. @SE1_Trading @LeeGrins @aussietorres @knmtechnology @esanchez81 (cont) http://t.co/mwArOhWy
Need to launch changes on DailyFX so US traders can watch videos. May take a few days. Meantime US viewers can go here: http://t.co/z54gnUQY Weekend Video (now available to US viewers): AUDUSD and Dow Clear Resistance Post NFPs, EURUSD Anchored http://t.co/eDfHlafs And, there were no fireworks in US crude positioning this past week. But then again, oil held congestion http://t.co/XOKxCq4l We had a notable jump in the net long interest in gold this past week. Feeding into the metal's upswing. http://t.co/9Q5FNffe We've noted the divergence between S&P 500 price and volume. Add to that net speculative positioning. http://t.co/PHLpdOMi We talk about the short-cover potential in EURUSD, but what about the unwinding of this big $AUDUSD long buildup. http://t.co/uHep6hbe In the meantime, here is the $EURUSD versus the net speculative Euro interest. A lot more room for covering here.. http://t.co/d7P0JHsa
weekly http://t.co/FjE1lFRL i WILL be online sunday night during the super bowl after I smoke my ribs on the grill #forex Yet another Friday where $EURUSD is rallying into the close on spec that Greek deal will be done. The US Dollar Index fell far behind this recent build up in net speculative positioning in dollars. http://t.co/vMcNiXT7 Here's the Dow Jones Industrial Average and its respective volume lull as well. http://t.co/e2X4CbFK Too much to expect a multi-month high close on the $S&P 500 to garner greater turnover. http://t.co/vnF8MqmY
Co-chairs of Greek Creditors Committee flying into Athens this w/e - either tough decisions need to be made or a deal is ready to be closed Best performing currency pair today is CADJPY +1.11%, Worst performing is EUR/CAD -0.60% RT @kathylienfx: @Fxflow Congrats on cracking above 8k// thanks K Flow Rules! :) crosses http://t.co/sTJIEdld better opportunities here (still) than in usd imo Awesome Timetable on Greece courtesy of WSJ. Print it out or save the link http://t.co/RnUs2EYX ...great quote from Sebastien Galy at Soc Gen in that article, “The SNB’s hand is being forced and it will likely be fairly brutal.” According to a good FT article on SNB political pressure for solid intervention, the options market is pricing in a 30% chance of 1.20 break EUR net short positions down 8 percent - confirming that shorts were "squeezed" over the past week That's a hearty drop in net dollar long interest from the COT figures. Good indicator for establishing a time frame for dollar's tumble.
This is the stand out figure IMO RT @djfxtrader: Net Yen Long Position $9.3 Billion Increases 30%,according to analysis of CFTC data #forex Here's the risk-trend alternative to the cable channel: $AUDUSD blowing through the potential triple top at 1.0750 http://t.co/q4EgQK8n
#FF The young ones in FX @Hew_Dat @stephensimonis @Lawrence_Fayman @josephrichman @Rebelgt09 @jaredboydfx You can't use rate expectations for the BoE, so here is $GBPUSD versus the UK-US 10yr yield differential. http://t.co/0pq2FBfE We're talking the spread of a crisis state from Greece to Portugal, but Portuguese CDS have pulled back recently. http://t.co/KQ85ZFYl Fed ZIRP 'less' ZIRPy -time for ECB/BoE/BOJ/SNB to play catchup (mkt weighing adj in rate diffs w/risk app)..balance sheets ready to implode
@JamieSaettele thanks buddy!..yep 161.8% projection of wave 3 vs 1 - kiddie stuff :-) Can u believe I will ACTUALLY be watching the Superbowl Sun? Usually I'm at a rest bc its the BEST day of the yr to get those had reserv!
Do now that we're all on LinkedIn, what happens? Do we all get raises? Or do we all hire each other? An hour an change left for the official NY trading session. Looks like we will hold onto these breaks for next week. You can definitely tell those officials that are irked by the 2014 FOMC hold call. Bullard says it was wrong to link it to a specific time. Our clients at Aspen have 1.0820 limits to take profits in AUDUSD to go flat for +225 pip trade. Feds Bullard says Fed may have to raise rates before 2014 and strong data weakens case for QE. He is a non voter on FOMC
The blog owner requires users to be logged in to be able to vote for this post.
Alternatively, if you do not have an account yet you can create one here.
Powered by Vote It Up
Information and opinions contained on this page are for educational purposes only and do not constitute trading recommendations.
Trading OTC Forex on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange or futures you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange and futures trading, and seek advice from an independent financial advisor if you have any doubts.
