Since the start of the week, in relatively subdued markets, the GBP has outperformed while the NZD has been the worst performer.
The market remained relatively tentative yesterday as Asian equities declined further as the Chinese market re-opened after being closed Thu-Fri. Trading was also subdued by the US Labour Day holiday.
Still, the NZD has been the clear under-performer since the start of the week. Opening for the week, around 0.6280, it briefly traded above 0.6310, but has subsequently subsided to sit around 0.6250 currently.
Aside from the ‘flash-crash’ late last month, the NZD/USD now trades at its lowest level since July 2009.
Yesterday’s NZ wholesale trade data was disappointing. Having dipped a lot in Q1, we were looking for a partially rebound in Q2. It didn’t happen. This, along with some still-soft forestry production statistics for Q2, has caused us to trim our Q2 production-GDP growth expectations to 0.7%, from 0.9%.
The NZD was also weaker on the crosses, most notably against the GBP. The GBP has strengthened ahead of this Thursday’s Bank of England meeting. The GBP/USD rebounded from its lowest level in four months. In recent months the market has pushed back its expectations of a first rate hike from the BoE to late 2016-early 2017. Comments from the BoE will therefore be carefully dissected for guidance on whether this is a realistic expectation. The GBP/USD trades at 1.5280 this morning. The NZD/GBP has declined around 1.3% since the start of the week to trade at 0.4090.
The EUR was a little weaker around the release of disappointing German industrial production data last evening. This dents hopes for a re-acceleration of growth in Q3. The EUR/USD touched evening lows toward 1.1120 before rebounding to trade at 1.1170 currently.
Today, there will be plenty to keep markets busy after their fairly quiet start to the week. The AUD may take its cue from the release of China trade data this afternoon. There is also the AU NAB business survey to look out for and a scheduled speech by RBA’s Ellis.
Domestically, the last meaningful GDP indicator is due in the form of manufacturing sales and inventory data. We expect these to infer a bounce in manufacturing production, largely as agriculture production rights itself from a drought-impacted Q1. But if this fails to occur then we might well have to finalise below 0.7%, on Q2 GDP.
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Kymberly Martin is on the BNZ Research team. All its research is available here.
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