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No lasting ill effects from worse-than-expected trade data

Posted in Currencies

By Ray Attrill


The NZD suffered no lasting ill effects from yesterday’s worse than expected trade data, Fonterra’s reaffirmation of its December forecasts for dairy sector payouts (a small rise might have been expected) and the official declaration of drought conditions in Northland.

We were in fact somewhat encouraged by the detail of the trade data that shows much of the ‘miss’ arising from higher imports, of capital goods in particular.

The net migration numbers were somewhat supportive, suggesting that we might be seeing the beginnings of a turnaround in migration trends, in particular the outflows across the ditch with migration to Australia hitting a two year low.

The NZD has traced out an 0.8226 – 0.8282 range, all of which has occurred in the afternoon New York session and with the high seen after out local market open this morning.

A rising US stock market and associated improvement in risk appetite has seen the US dollar  softer across the board (all bar against the yen) and the local dollar has been a beneficiary of this.

Locally, we have January building permits data but  which are unlikely to be a big market mover. We own the ‘median’ market estimate here at -2.0% (range -1.0% to -3.0%) in what we expect to be a partial unwind from the 9.4% December surge.

Later (1:00pm) we will get  the latest (Feb) ANZ business confidence reading and activity outlook. These were 22.7 (confidence and  31.4 (activity) in December.)

The NZD/AUD cross will be subject to the reaction in the AUD to the Australian Q4 capex report and in particular the revisions to forward estimate for FY13 capex plans.


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In Australia the major release today and for this week is the December quarter Capital Expenditure Survey (1.30pm NZT) with its estimate of spending in the quarter, updated 2012/13 plans and the first look into 2013/14 plans six months ahead of the year’s start.

The AUD’s fortunes today should turn on this report. With money markets still pricing almost a one third probability of a RBA March rate cut (and 50bp in total this year), should these numbers create a sense the RBA will be even more comfortable rocking back on its heels for now, AUD should draw some fresh support and advance back to the mid-1.02s.

A weak report in contrast could see us quickly back to the overnight lows and bringing with it the threat of a test of key support at 1.0150 (the October 2012 low).

The consensus for the quarter is +1% with NAB at -1%, coincidentally the same as for yesterday’s construction report.

For 2012/13 expectations, any expectations $ number around $170 bn would mean no material change to growth from the last survey’s 6.8% budgeted growth.

The first estimate for 2013/14 will be a bit hairy given this early stage, but worth a look.

HIA new home sales for Jan are also due (1.00pm NZT) (more signs of housing recovery?), along with RBA credit (1.30pm NZT) as  well as the China MNI Business Sentiment indicator (2.35pm NZT).

Before then comes a succession of releases, starting with Dallas Fed President Fisher (a monetary hawk but not a FOMC voter this year; he’s much cooler on QE than Bernanke) speaking at (10.30am), NZ building permits (10.45am) and business confidence (1.00pm), and South Korean industrial production (midday), followed by Japan’s February manufacturing PMI at 12.15pm (L: 47.7) and industrial production (12.50pm).

All worthy of a look. German unemployment, a later vintage of US Q4 GDP,  US weekly jobless claims and the Chicago PMI are all  due tonight.

Other News:

* Aust Construction Work Done (Q4) -0.1% after +1.9% (forecast +1.0%);

* UK GDP (Q4) left unrevised at -0.3%, year-to growth now 0.3% (was 0.0%);

* Euro-zone Business Climate Indicator (Feb) -0.73 after -1.09 (forecast -1.02);

* US durable goods orders (Jan) headline -5.2%, below forecast -4.7%, but core orders were strong; and

* Pending home sales (Jan) +4.5% (forecast +1.8%)

Event Calendar:

28 February: NZ building permits; AU new home sales; NZ ANZ business confidence; AU Capex; EU German unemployment; US jobless claims;

1 March: NZ terms of trade; CH PMI; EU PMIs; UK PMI; US ISM manufacturing.

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