Greek economy shrank 6.2% in Q2 but not as bad as generally expected

By Kymberly Martin

NZD

The NZD/USD eased a little lower overnight in relatively quiet markets, finding support at the 0.8080 level.

Yesterday’s Food Price Index gained little attention from markets, but the 0.2% increase for the month of July was a little below our expectation and enough to push our Q3 CPI pick to 0.6% from 0.7%. This suggests a 1.1%y/y Q3 CPI outcome, which is exactly in line with RBNZ expectations.

While the NZD/USD traded in a 0.8100 to 0.8130 range yesterday, it drifted off overnight to trade around 0.8090 currently. Short-term we continue to see support for the NZD/USD around 0.8065. Resistance is eyed at 0.8170.

Today’s Q2 retail trade report will likely capture some attention. We expect a 0.7% bounce-back, following the mild dip of 0.6% in Q1. This may help to improve the current relatively cautious mood toward the NZ economy after the recent patch of relatively soft data.

There was absolutely no pulse in NZD/AUD trading over the past 24-hours, as it tracked the 0.7690 level very closely. Today’s release of the NAB business conditions survey (1.30pm NZT) across the Tasman may impact on the cross.

The NZD lost a little ground relative to both the GBP and EUR in relatively quiet trading overnight. Direction on these crosses will likely come from a number of key European data releases tonight (see Majors).

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Majors

The market has a feeling of summer lethargy in the wake of the Olympic closing ceremony. While markets were relatively directionless overnight, the EUR gained relative to the USD.

The markets seem a little in limbo. There has been a pleasant lack of dramatic European headlines of late.

Lacklustre global growth data remains a concern, especially when China contributed some disappointment on Friday. However, markets continue to weigh weakness relative to the prospects of increased policy support.

Overnight, the EUR gained the slight upper hand relative to the USD. Greece managed to avoid sending shock waves through markets when it reported its economy shrunk by less than expected in Q2 (-6.2% vs. -7.0%). The EUR/USD crept up from 1.2280 to 1.2340.

Elsewhere, equity markets have recorded modest negative returns. The Euro Stoxx 50 slipped 0.30% and the S&P500 is currently down 0.20%. Our risk appetite index (scale 0-100%), however, remains at a relatively lofty level around 70%.

The AUD, along with the NZD lost some favour relative to the USD and EUR overnight. The AUD/USD slipped from above 1.0570 to sit just above 1.0500 at present. The NAB business conditions survey will be released, as the most important indicator for the AUD today.

Tonight, there will be a bit more for markets to get their teeth into. Eurozone Q2 GDP and the German ZEW economic sentiment surveys will be released. These provide a backward and a forward look at how the region is progressing. Tonight the US releases retail sales data.

Event Calendar: 14 August: NZ retail trade; AU NAB business confidence; UK RICS house prices; EU GDP; UK core CPI; EU German ZEW; US PPIs; US retail sales; 15 August: NZ card spending; AU consumer confidence; AU wage costs; UK BoE minutes; UK employment; US CPI; US empire manufacturing; US IP;16 August: NZ dairy auction; NZ BNZ PMI; US Fed’s Kocherlakota speaks; UK retail sales; EU CPI; US jobless claims; US housing starts; US Phillie Fed; 17 August: NZ PPIs; US Michigan consumer confidence.

All its research is available here.