Foreign Exchange - Weekly Update - Tuesday, December 22, 2009 6:30 - 0 Comments

World First Foreign Exchange NZD / AUD Update: 21 December 2009

AUD
The AUD weakened last week as all eyes were on the GDP figure and the RBA minutes. The central bank took a less hawkish tone on future rate hikes, whilst the currency fell faster than risk appetite throughout the week, assisted by mixed economic data locally and broadly strong economic data  in the US.

To start the week Dwelling Starts (9.4%) were particularly high whilst the Westpac Leading Index was significantly lower than the previous month. Most importantly was Wednesday’s GDP figure (0.2% QoQ) which was below expectations and resulted in a run on the Aussie. The RBA minutes released on Monday said that the three previous rate rises had materially shifted ‘the stance of policy to a less accommodative setting’ and that it had increased the ‘flexibility available to the board at future meetings’.

The economic data and the less vocal support by the RBA saw the price of two-year bank notes rise as traders pared expectations of a February rate rise. The Aussie fell to its lowest in 10weeks, only to have a slight recovery on Friday supported by increased risk appetite in the equity markets.

The week ahead in Australia
Monday 21st – New Motor Vehicle Sales.

AUDUSD
The pairing performed poorly last week, opening at 0.9090 and tracking downwards throughout the week, to close at 0.8870.

The week ahead in the US:
Tuesday 22nd – GDP, Personal Consumption, Gross Domestic Purchases, Existing Home Sales, Housing Price Index, Richmond Fed Manufacturing Index, API Crude Oil Inventories, ABC/Washington Post Consumer Confidence.
Wednesday 23rd – Personal Consumption Expenditures, Personal Income, New Home Sales, Reuters/Michigan Consumer Sentiment, EIA Crude Oil Stocks change.
Thursday 24th – Durable Goods Orders, Initial Jobless Claims, Continuing Jobless Claims.

AUDGBP
The pairing opened at 0.5598 and tracked downwards from overnight trade on Tuesday to close the week at 0.5483.

The week ahead in the UK:
Tuesday 22nd – Current Account, GDP.
Wednesday 23rd – BoE Minutes, BBA Mortgage Approvals, Index of Services.
AUDEUR
There was significant volatility in this pairing, opening the week at 0.6218 then performing well until Tuesday where it remained flat before falling sharply on Wednesday morning. The pairing closed the week at 0.6168.

The week ahead in the Eurozone:
Wednesday 23rd – Industrial New Orders.
Thursday 17th – Construction Output.

NZD
The New Zealand dollar had a weak showing last week, assisted by less hawkish comments on interest rates whilst speculators closed their positions on risky currencies before year-end. There was a vacuum of economic data in NZ, with only the Business Confidence figure being released on Thursday.

Business Confidence (38.5) is trading close to its 10 year high, however there were measured comments by the Finance Minister. Bill English said on Wednesday that “the recession is turning out to be not as deep” however that “there are quite significant risks. We still face the headwind of a high dollar”. There was also greater commentary about future interest rate increases in the US by the FOMC, as economic data there was supportive of economic growth. The interest rate differential is a key driver for the NZD with the risk of such trades being that the NZD depreciates.

The week ahead in NZ:
Monday 21st – Credit Card Spending, Current Account.
Tuesday 22nd – Westpac Consumer Confidence, GDP.

AUDNZD
The pairing opened at 1.2533 and performed well until Tuesday when the AUD fell away with risk appetite at a greater level than the NZD. The pairing closed the week at 1.2474.

GBPNZD
The pairing opened the week at 2.2356 and tracked higher for most of the week, closing at the 2.2680 level.
 
EURNZD
There was significant volatility with this pairing, opening the week at 2.0140 and closing the week relatively unchanged at 2.0176 after reaching a high of 2.0300 mid-week.

NZDUSD
The pairing opened the week at 0.7229 and remained relatively unchanged until Tuesday morning when it lost ground for the rest of the week to close at the level of 0.7100.