NZD Update

The past week has seen a fair amount of volatility across the markets as the global economic recovery has been scrutinised. The market analysts are unsurprisingly saying the recovery is going to be a long affair and confidence is still low.

The knock on effect for New Zealand is that the odds of a rise in the OCR in June could be lessening especially in view of the NZ Dollar losing 4% in value to the US Dollar over the duration of the past couple of weeks.

The NZ Budget was the main event locally in the past week. It was broadly viewed as positive by the markets. The backbone of it was that an improved economic outlook is expected to decrease fiscal deficits for NZ over the coming few years, which is a rosier outlook than many countries can paint.

The NZ Dollar was momentarily supported by the positive overtones to the budget however the support did not last for long as it came under pressure from risk aversion. Global confidence is still waning, subsequently safe haven currencies are being favoured above that of commodity currencies such as the NZD. The NZ dollar was not alone in losing ground – the Australian dollar similarly has had a poor couple of weeks.

Local data over the coming week is likely to have little effect on the NZ Dollar’s direction. Risk aversion is set to continue to play a bigger role. That said small improvements in the SNZ Building Consent figures and SNZ Overseas Merchandise Trade figures (April) are expected.

GBPNZD has moved up a fraction over the past week from the 2.12’s up to the 2.15’s. This is down to risk aversion putting the NZD on the back foot rather than anything positive coming from the UK.

Having lost a lot of ground at the beginning of last week and the end of the week before NZDUSD is now sitting at the 0.67 level where economists think it may find a small amount of resistance which could halt the pair dropping further in the short term.

The Euro has managed to claw back some of its recent lost ground against NZ Dollar but is still in a vulnerable position. Mid last week EURNZD sat in the 1.82’s. Following a swift sell off in the NZ dollar at the end of last week the Euro managed to gain almost 3% in value (EURNZD finished last week in the 1.88’s). The early part of this week has seen the NZ dollar claw a little of that back and we are now sitting at EURNZD 1.8435.