German GDP surprises positively, US consumer confidence surprise fall, AU jobless picked to rise, no expectation of a Greek resolution

By Raiko Shareef

NZ Dollar

Last week ended with more a whimper than a bang, with global asset markets relatively subdued.

The Bloomberg Dollar Spot Index is down just 0.1%, with NOK and CAD outperformers on a bounce in oil prices.

US investors are enjoying a long weekend, while tonight will see some decisions made about Greece’s finances. We expect to hear the sound of a can, kicked.

For local markets, RBA Governor Stevens’ testimony to parliamentarians on Friday was heralded as one to watch. In the end though, the Governor failed to fuel market expectations of a third rate cut (beyond the second already priced in by May).

Stevens noted that unemployment would likely keep rising for a while, and said further adjustment [lower] in the AUD is likely to occur.

The lack of any fresh vitriol saw the AUD gain modestly toward 0.7800. It sits 0.1% higher at 0.7770.

On Friday night, economic data failed to make much of an impression, despite some strong surprises. In particular, German GDP printed more than twice as strong as expected, clearly benefitting from a lower EUR and lower oil prices.

On the other hand, Greek GDP contracted by 0.2% q/q (a 0.4% gain expected). This will further exacerbate already-painful debt repayment, and may colour the negotiations this week.

Tonight sees another meeting between Greece and its creditors, where there is an expectation that some sort of decision will be made. Given the poor outcomes seen over the past week, we are not holding our breath for a lasting solution.

Instead, we anticipate that some short-term agreement, with the bigger issues left on the table. Headlines of any ‘agreement’ per se would likely see EUR perk up slightly, but we would not get carried away.

Back to data, the US consumer confidence come-down on Friday night was not taken with great alarm, given the series’ extremely high level relative to history.

But we note that US economic surprise indices are deeply in the red, after spending much of H2 2014 in positive territory.

While absolute data tone in US remains robust, the growing number of negative data surprises might check the USD mega-rally somewhat.

In currencies, oil-sensitive NOK and CAD were the best performers on the G10 leader-board, rising 0.7% and 0.5% respectively as oil bounced for a second session. WTI crude rose by 3.1% to $52.8.

NZD was not far behind, closing just above 0.7450. The resistance that level provided has clearly been broken, but it remains magnetic.

We continue to think that NZD will generally outperform its peers, based on solid economic data and an RBNZ that is firmly on hold (rather than espousing an easing bias). We would only consider getting short NZD/USD closer to 0.76.

Today’s retail sales figures, likely to be robust, should help a push toward 0.75, at least. We pick at 0.7420 – 0.7500 range today.

The US President’s Day holiday today should put a dampener on markets. In addition, the week ahead is hardly riddled with huge risk events. The FOMC minutes (Wed) will likely be the highlight.

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