Nzdusd - page 16
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RBNZ Preview: Dovish Stance to Weaken Kiwi
Market reaction to the Reserve Bank of New Zealand's (RBNZ) cash-rate statement on Thursday will hinge on how the bank decides to articulate its newly-adopted dovish stance.
In a speech last week RBNZ Assistant Governor Dr John McDermott said the RBNZ is not considering any increase in interest rates.
"Before considering any tightening in monetary policy we would need to be confident that increased capacity utilization and labor market tightness was generating, or about to generate, a substantial increase in inflation," McDermott told the Waikato Chamber of Commerce and Industry on Thursday.
Inflation figures released last week showed the CPI growing just 0.1% year-on-year in the March quarter, far from the RBNZ's 1-3% medium term target band. While the most dampening impact on inflation came from cheaper fuel prices over the first quarter, when excluding fuel, inflation was still only 1.0% over the year.
While ruling out rate increases, McDermott said that evidence of weakening demand and domestic inflationary pressures would prompt the bank to consider lowering interest rates.
Analysts at JP Morgan think that the upcoming RBNZ meeting is "unlikely to deliver an explicit bias to ease."
Prior to McDermott's speech the RBNZ had held a clear neutral bias, repeating several times that its next Official Cash Rate (OCR) change, either up or down, would depend on economic developments. In the March Monetary Policy Statement the bank had the 90-day bank bill rate forecast unchanged until the March-2017 quarter, suggesting no intention to ease or tighten.
Westpac chief economist Dominick Stephens said in a note on Friday that the RBNZ will find some way on Thursday to introduce more asymmetry into its language than it has used previously. "At the very least, any reference to the OCR going "up" will be purged," he wrote.
Chief forecaster at Wellington-based Infometrics Gareth Kiernan told WBP Online that while he still expects the next move to be a hike, "the lack of inflation (even abstracting from the massive drop in fuel prices) is raising questions about the overall tightness of monetary conditions and whether interest rates should or could be lower."
The NZDUSD has found a good support at the 0.7600 level, the pair may still go back up and try to visit its 200 day EMA around the 0.7739 level.
NZD/USD: Rate-Hike Rhetoric Drags Down Kiwi Over Week
Coming under pressure from the Reserve Bank of New Zealand (RBNZ) and a recovering US dollar, the kiwi lost ground and dropped markedly over the week.
The major driver of the week was comments from RBNZ Deputy Governor John McDermott that a rate-hike is not a possibility during the coming months. Nevertheless, a rate-cut can not be ruled out thereafter.
"Before considering any tightening in monetary policy we would need to be confident that increased capacity utilization and labor market tightness was generating, or about to generate, a substantial increase in inflation," McDermott said.
Weaker domestic demand and inflationary pressures could be the trigger for an adjustment of the Official Cash Rate, which stands now at 3.50%.
On the US side, after a poor April due mostly to the labor market and overall GDP for Q1 2015, the US dollar started its recovery on Thursday, which continued into Friday's session when the University of Michigan's (UoM) Consumer Confidence report provided some impetus.
The final reading on UoM consumer confidence remained the same at 95.9 points in April, just missing expectations of 96.0 points, but remained at markedly high levels.
Rate-hike speculation remains the major topic for US dollar trading pressures. Although liftoff in June is now more pie in the sky after Q1 data, speculation generally points to the first rate-hike still happening later this year. Over the week, the kiwi suffered a drop of 0.85% to end the week at $0.7543.
source
NZD/USD weekly outlook: May 4 - 8
The New Zealand dollar fell to a more than two-week low against its U.S. counterpart on Friday, amid signals that the U.S. economy may be stabilizing after a recent bout of weakness.
NZD/USD hit 0.7507 on Friday, the pair's weakest level since April 15, before subsequently consolidating at 0.7543 by close of trade on Friday, down 0.96% for the day.
For the week, the pair fell 0.92% as the greenback was boosted by longer-term expectations for a U.S. rate rise.
U.S. economic data on Friday showed that activity in the manufacturing sector was stable in April, after slowing in the five previous months, while consumer sentiment improved to its highest level since January last month.
On Thursday, weekly claims data showed that the number of Americans filing for jobless benefits fell to a 15-year low of 262,000 last week, fuelling optimism that the U.S. economy has turned a corner after a recent soft patch.
Data published Wednesday showed that the U.S. economy grew just 0.2% in the three months to March, slowing from 2.2% in the final quarter of 2014. It was the slowest rate of growth in a year.
The disappointing data prompted investors to push back expectations on the timing of an initial rate hike by the Federal Reserve to later this year from midyear.
But in its rate statement on Wednesday the Fed said recent indications of a slowdown in growth were probably due to “transitory factors.”
Meanwhile, the Reserve Bank of New Zealand signaled the possibility of upcoming rate cuts following the conclusion of its policy-meeting earlier in the week.
The RBNZ held its benchmark interest rate at 3.50% in a widely expected move, but said it could lower borrowing costs in the future if demand weakens and wage and price-setting outcomes settle at levels lower than is consistent with the inflation target.
In the week ahead, investors will be focusing on Friday’s U.S. nonfarm payrolls report, for a fresh indication on the strength of the economic recovery. Market players are also looking ahead to New Zealand employment data due on Wednesday.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
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The 0.7500 could act as a good support for the NZDUSD.
New Zealand Q1 unemployment rate: 5.8% (expected 5.5%)
mployment data for Q1 due from New Zealand:
Unemployment rate for Q1: 5.8% BIG MISS on estimates! -NZD/USD marked lower immediately and just above 0.75 as I update
Employment change for Q1 q/q: +0.7%
Employment change for Q1 y/y: 3.2%
Participation rate for Q1: 69.6 %
Private wages including overtime for Q1: +0.3% (+1.8% y/y v. +2 expected)
Private wages excluding overtime for Q1: +0.3%
Average hourly earnings: +0.2% q/q
NZD/USD: Kiwi Slides Below $0.75, Cautious Trading Before NFP
The pair was slowly easing on Thursday and reached support at $0.7450, around 0.5% lower on the day during the US session. The greenback was supported by solid jobless claims, which printed 265,000, up from last week's 262,000. Last week's reading still stands at a 15-year low and hints at a strong hiring trend in the US labor market.
On Wednesday, theADP's labor market update for Aprilshowed that 169,000 new jobs were created in the US private sector, missing the expected moderate hike of 200,000 new jobs. Moreover, the previous month's reading was downwardly revised to 175,000 from a figure of 189,000 seen originally. The disappointing US labor market data led to another wave of dollar selling.
Looking ahead, the essential non-farm payrolls report is due on Friday, with market participants expecting an increase of 230,000 jobs in April.
"A weaker-than-expected ADP report forced more capitulation on USD longs, showing private payrolls growing by just 169k in April. However, our economists point out the firm reading on the non-manufacturing ISM survey and continue to forecast a 275k reading on Friday’s release," analysts at BNP Paribas wrote in a research note on Thursday.
The kiwi came under pressure after the New Zealand jobless rate ticked up to 5.8% in the first quarter, slightly higher than the previous reading of 5.7%, while markets had expected it to drop to 5.5%.
Moreover, wage growth was also weaker than expected, suggesting that the Reserve Bank of New Zealand could be tempted to cut rates in the future to reignite inflation. The clearly dovish message at the central bank's latest meeting undermined the kiwi and the currency pair broke its medium-term bullish trend.
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NZD/USD: Kiwi Briefly Lower, Nears $0.74
The main focus on Friday remains on the US non-farm payrolls, which are due later during the US session. It is expected to post a 228,000 jobs increase, up from last month's dismal 126,000 print. The unemployment rate should fall to 5.4% from 5.5%.
The NZD/USD pair was changing hands at $0.7430 during the London session on Friday, around 0.2% lower on the day and was slowly fading towards $0.74.
On Thursday, jobless claims for the previous week printed 265,000, up from last week's 262,000. Last week's reading still stands at a 15-year low and hints at a strong hiring trend in the US labor market.
"A better initial jobless claims print ahead of tonight’s payrolls report saw the USD pick itself off two month lows on expectations of a positive payrolls print tonight,"ANZ wrote in a research note on Friday.
Furthermore, the RBNZ at its latest meeting kept the main rata (OCR) at 3.5%, but the central bank offered a rather dovish outlook, saying there is a possibility of lowering the rate in the future as inflation and wage growth remain muted. The RBNZ also ruled out further rate hikes, which had not been anticipated as investors had expected the central bank to raise rates later in 2015.
The kiwi broke its medium-term bullish trend against the greenback and continued to trade weakened, with today's NFP figures might offer further strength to the greenback, pushing the pair below the $0.74 handle.
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NZD/USD weekly outlook: May 11 - 15
The New Zealand dollar fell to a five-week low against its U.S. counterpart on Friday, before turning higher after data showed that the U.S. economy created slightly less jobs than expected last month.
NZD/USD hit 0.7442 on Friday, the pair's weakest level since April 1, before subsequently consolidating at 0.7495 by close of trade on Friday, up 0.6% for the day.
For the week, the pair fell 0.64%, as the greenback was boosted by longer-term expectations for a U.S. rate rise.
The Labor Department reported Friday that the U.S. economy added 223,000 new jobs in April, just below expectations for jobs growth of 224,000. March’s figure was revised down to just 85,000 from a previously reported gain of 126,000.
The unemployment rate fell from 5.5% to a near seven-year low of 5.4% last month, broadly in line with forecasts.
The mixed data fuelled speculation that the Federal Reserve may hold off raising interest rates in the immediate future. However, investors conceded that higher rates still remain on the horizon.
Recent economic reports have indicated that the U.S. economy has slowed since the start of the year, prompting many investors to push back expectations on the timing of an initial rate hike by the Fed to late-2015, instead of midyear.
Meanwhile, in New Zealand, official data released Wednesday showed that the number of employed people rose by 0.7% in the first quarter, disappointing expectations for a 0.8% gain.
The report also showed that New Zealand's unemployment rate rose to 5.8% in the three months to March from 5.7% in the previous quarter, compared to expectations for a decline to 5.5%.
Elsewhere, China reported a trade surplus of $34.1 billion in April on Friday, below expectations for a surplus of $39.5 billion. Exports slumped 6.4% from a year earlier last month, disappointing expectations for a gain of 2.4%, while imports sank 16.2%, worse than forecasts for a decline of 12.0%.
The slide in imports pointed to persistent weakness in the economy, fuelling speculation policymakers will do more to boost growth.
On Sunday, the People's Bank of China cut its benchmark interest rate by a quarter percentage point to 5.10% from 5.35%, in order to spur economic activity and boost growth.
It was the third rate cut in less than six months, indicating that Beijing is becoming more aggressive in supporting the economy as its momentum slows and deflation risks rise.
The Asian nation is New Zealand's second-largest trade partner.
In the week ahead, investors will be focusing on Wednesday's U.S. retail sales report for April, for fresh indications on the strength of the economy and the timing of a U.S. rate increase.
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ANZ says RBNZ will cut rates in both June and July
ANZ New Zealand chief economist Cameron Bagrie:
NZD lower ...