By Kymberly Martin
If the coming NZ winter is all about an Andalusian road trip or perhaps two weeks in a Tuscan villa then you are loving the ongoing extension of the NZDEUR to fresh all-time highs above 0.7150.
Of course if your business is selling blocks of cheese or lamb racks into European supermarkets the demise of the single currency is killing your bottom line.
The NZ$ continues to outperform at the start of the week, broad cross rate strength a feature despite headline inflation printing an annual outcome of just 0.1% yesterday.
With sovereign rates of return starting with a 3 handle versus the minimal even negative rates of Europe then global investor demand for NZ$ remains evident and then there is the small matter of the Greek tragedy to further cloud EUR sentiment.
As to Mondays inflation print, the March quarter saw CPI fall -0.3% to take the annual rate down to just 0.1%; the lowest it has been since Q3 1999.
While this was in line with our estimates, it was slightly below market expectations of a 0.2% decline for the quarter and for annual inflation of 0.2%.
While certainly soft, significantly south of 1.0 to 3.0% target band, the RBNZ own forecasts of a -0.4% fall for the number shows they are well in front of the CPI out-turn.
We now keenly await a speech in Hamilton by RBNZ Assistant Governor, John McDermott on Thursday lunch-time. This has been flagged with inflation as the subject and ahead of the next OCR meeting on April the 30th will likely colour the sentiment of traders in the final run into the end of the month.
RBA Governor Stevens spoke overnight in New York, and for the most part has not told markets anything new. Despite the bright print of employment data last week the May meeting of the RBA Board is live for consideration of easing policy.
Dudley of the Federal Reserve also got headlines from New York, sounding at times optimistic that a rebound in growth will support a decision to raise rates later this year. He spoke of watching the PCE for signs the economy is regaining momentum after the winter hit. Dudley also drew attention to a NY Fed study that estimates the rise of the US$ by some 15% since mid-2014 may shave up to 0.6% off GDP this year.
European financial press has plenty of headlines on Greece, but ahead of the EU finance ministers meeting at the end of the week there appears to be little new information to hand as yet.
There still appears to be little common ground and the EUR has lead currency markets lower overnight, the NZDUSD sympathetic and retreating once again from trading on the 77 cent handle.
The RBA remain a focus for today, the release of the minutes from their April meeting (when rates were on hold). Recall that in March the RBA saw advantages in receiving more data to indicate whether or not the economy was on the previously forecast path. A restatement along similar lines or even some clarification of how the economy is tracking relative to the earlier forecast will provide useful guidance.
Australia also serves up the Q1 NAB Residential Property Survey, covering views and prospects for the industry.
Tonight we get German updates of their ZEW Surveys which are probably just a momentary diversion from the ongoing Greek tragedy as Tsipras and Varoufakis try to unboil an egg.
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1 Comments
If the coming NZ winter is all about an Andalusian road trip or perhaps two weeks in a Tuscan villa then you are loving the ongoing extension of the NZDEUR to fresh all-time highs above 0.7150.
Of course if your business is selling blocks of cheese or lamb racks into European supermarkets the demise of the single currency is killing your bottom line.
It's set to get a whole lot worse for the latter.
Central banks keen to steer clear of negative-yielding assets in a rapidly depreciating currency could cut the foreign exchange reserves they hold in euros by a hundred billion dollars or more, analysts estimate.
The near year-long slide in the euro and the move below zero of many euro zone government bond yields has driven a shift by official institutions, among the world's most conservative investors, on how they manage their $11.6 trillion of FX reserves.
Several analysts, mostly in conjunction with bearish forecasts on the euro, said they expect central banks' euro-denominated reserves to fall below 20 percent of overall holdings over the coming quarters from around 22 percent.
A continued decline in the euro's value against the dollar will account for much of that, but outright selling could still run into a 12-figure sum - a significant flow out of the single currency and a major force for further weakness.
"This shift could amount to as much as $104 billion per year," according to estimates from Goldman Sachs. Read more
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