NZD Update

The past weeks domestic data for NZ has shown that although it’s been a year since New Zealand officially moved out of recession things are still on uneven ground and the up and down nature of the data reflects what is happening globally and the pace of recovery elsewhere.

On a positive note, last week’s SNZ GDP release for the March 2010 quarter showed an increase by 0.6% with the annual growth rate increasing to 1.9%. However, so far this week the data has taken a negative direction. The National Bank Business Outlook for June (released on Monday) dropped to 40.2 compared to 48.2 last month, and the SNZ Building Permits for May which is considered a leading indicator for the housing market (released on Tuesday) came out at a disappointing minus 9.6 per cent versus 8.5 per cent last month.

Looking forward to upcoming data – tomorrows ANZ Commodity Price Index for June will indicate if export earnings will likely be upset by global problems of late. Commodity prices have increased over the past few months however the RBNZ are mindful that these increases may be temporary especially in view of the recent lower than expected growth data from China.

Sterling has managed to make some reasonable gains against the NZD over the course of the past week, however these are less to do with the Sterling strength and more to do with the NZ dollar reacting to slightly weaker than expected domestic data and moreover risk aversion picking up off the pack of a poor consumer confidence figure in the US.

The NZDUSD rate has remained at a relatively elevated figure over the past week given that risk appetite is diminishing. From mid last week through to the first half of this week the rate has remained above NZDUSD 0.70.

The Euro NZ dollar has by and large remained in the low to mid 1.7’s for the past week (ranging between 1.725 – 1.760). There has been some small moves in the Euros favour in the past few days, however the overnight news that there is concern over European banks being able to repay funding could well undermine the Euro in the second half of the week.