By Danica Hampton The week came to a close with trading centred around markets reducing risk appetite and continuing to question the optimism of the most recent months. Trade data for the month of June from China was something of a catalyst for further liquidation of risky foreign exchange trades, with commodity currencies like the AUD & NZD under pressure. The trade surplus printed at US$8.25 billion "“ well below the previous month's US$13 billion as the expectations for a strong export led performance were thrown into doubt. Throughout the overnight session data was somewhat mixed, improved French and Italian Industrial Production numbers countered by a poor result from the Uni. Of Michigan Consumer Confidence Survey "“ the latter suggests that ever-rising unemployment means a less optimistic consumer in the US. The NZD closed out the week at the US 0.6275 level and at AU 0.8070, some strength on the NZDAUD cross as the AUD bears the brunt of investor disquiet at the moment.

This weeks economic calendar locally is abbreviated, but not without some interest. On Monday we expect May's retail trade statistics to look decent enough, on the surface, but note that the electronic card transactions data already warn the Q2 trend in spending will be essentially flat once June is factored in. On Thursday June's Performance of Manufacturing Index could register a lift, but we expect global difficulties still at play will keep it from reaching the break-even level of 50. Also on Thursday we anticipate a 0.8% lift in the Q2 CPI, partly driven by an anticipated 0.4% increase in food prices. More generally, we wonder if businesses might try to wriggle price increases through, here and there, in a desperate bid to restore profitability (especially for those dealing with exchange rate costs). As we start the new week, we would highlight immediate resistance at the 0.6325/0.6350 level "“ beyond that 0.6400/0.6425. As we saw last week support exists at 0.6200/0.6225, with periodic demand from both onshore and far east accounts. Further weakness in the expectations for the global outlook would likely take us lower, towards the 0.6125/0.6150 window that until late May had contained the NZD advance off February lows. Our own modelling, as noted on Friday, pitches fair value for the NZDUSD as the 0.5910/0.6110 level. The week came to a close with sentiment poor, analysts and markets realising that the hopes of spring can't carry the market forever. A realisation that the data is going to matter as the government printing presses can't go on indefinitely. Chinese and US trade data on Friday in focus, though the latter was overshadowed by the weak US consumer as highlighted by the University of Michigan survey. Equity markets traded out the week with red ink on the board, symptomatic of the close for FX markets and risk appetite. There's a busy calendar of data to consider this week, as well as the US Earnings season we mentioned last week. On the data front we will see US inflation data, Manufacturing & Industrial readings as well as the minutes of the June 24 FOMC. From the UK there are employment readings to note while Germany updates the ZEW Survey on Tuesday night. To start the week, we'll take a look at Japanese Industrial Production and Capacity Utilisation numbers though most locals will have their focus on the retail numbers at 1045AM.

* Danica Hampton is BNZ's Currency Strategist. All of the research produced by the BNZ Capital team of economists is available here.