sign up log in
Want to go ad-free? Find out how, here.

NZ consumers unfazed by first RBNZ rate hike and threat of more; 'case for ongoing OCR increases remains strong'

Currencies
NZ consumers unfazed by first RBNZ rate hike and threat of more; 'case for ongoing OCR increases remains strong'

by Raiko Shareef

NZ Dollar

The NZD weakened by 0.7% against the USD over Thursday to 0.8560.

With little movement over Friday and Monday, it opens this morning around that level.

The move occurred in the face of broad-based USD strength.

That said, the NZD is weaker against all of the TWI constituents, with the largest fall in NZD/GBP, which dropped by 0.8% to 0.5095. The NZ TWI is 0.7% weaker at 79.60.

There was little reaction to a broadly positive NZ consumer confidence outturn. The headline print in the ANZ-Roy Morgan survey rose from 132.0 to 133.5 in April, implying less than a one-point fall once seasonally adjusted.

We were slightly surprised that consumers were seemingly unfazed by RBNZ’s first rate hike and the strong message of more to come.

On that note, we expect the Bank to follow through with another 25bp hike this Thursday, despite the recent strength in the NZ TWI.

The case for ongoing OCR increases remains strong, with GDP growth indicators clearly above trend and a continued rise in business’ pricing intentions.

The other NZ releases due this week will likely fly beneath the radar. We don’t see any reason for Wednesday’s net migration figures to show anything but another strong inflow of migrants.

----------------------------------------------------------

To subscribe to our free daily Currency Rate Sheet and News email, enter your email address here.

Email:   

----------------------------------------------------------

Majors

The USD strengthened into the end of the Easter-shortened week, benefitting from a positive US data and a surprise agreement between major powers on Ukraine.

On the data front, US initial jobless claims printed at 304k, better than the 315k expected. More attention was paid to the Philadelphia Fed manufacturing index, which jumped from 9.0 to 16.6 in April, a seven-month high.

Markets took these outturns as further signs that the US economy is pulling itself out of the weather-related doldrums.

Before the weekend proper, key players in Ukraine’s ongoing crisis unexpectedly reached an agreement towards de-escalation of tensions. Russia, the US, the EU, and Ukraine agreed to the disarming of all armed groups, an amnesty for most of those recently detained, and the vacating of occupied streets.

As a result, the US Dollar Index is 0.2% stronger than it was on Thursday morning, currently at 79.95. It has held onto gains despite little sign that the conditions of Thursday’s accord are being implemented. Both sides are already accusing the other of violating the terms of the agreement.

Elsewhere, the JPY weakened as Japan logged its 21st consecutive monthly trade deficit, a record run. The country printed a trade deficit of ¥1.45tn in March, much weaker than the ¥1.07tn expected. The JPY is 0.2% weaker against the USD relative to Thursday at 102.62.

The data flow due over the coming days belies the holiday-shortened week. Among the key releases in this part of the world are the flash reading of HSBC’s China PMI and Australia’s CPI inflation for Q1 2014. Aside from that, the continued improvement in US data tone will continue to be scrutinised. There, durable goods orders and the Markit PMI will be watched.

Today, US existing home sales, the Richmond Fed manufacturing index, and euro-zone consumer confidence will be the data highlights. No doubt markets will be also be sensitive to developments in Ukraine.

Daily exchange rates

Select chart tabs

Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
End of day UTC
Source: CoinDesk

All its research is available here.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.