By Roger J Kerr Standard & Poors receive a special briefing from the Government Treasury today ahead of Thursday's budget, therefore it was a bit surprising that they rattled the sabre in the media about Government debt levels and debt reduction timing. However, how S&P react to Thursday's budget will be important for the Kiwi currency direction. Any negative comments about the security of the current credit rating would send the Kiwi lower. PM John Key has already stated that it is unlikely that the forward debt projection will show reductions within the five years S&P are looking for. S&P totally believed the Australian Government's rather optimistic GDP growth forecasts a few weeks ago, therefore there is no reason to suggest they should not give a tick to the Government's numbers on Thursday. The likelihood of a credit rating downgrade remains very small, but the markets can be expected to get a little nervous about it over coming days. Potentially more negative for the Kiwi is our key agriculture commodity price, dairy product prices returning to a downward direction as the US put subsidised product on the globally traded diary market. The global economic recession was always likely to increase trade protectionism where the big boys shove the little fella's like us around. Another bout of weakness in dairy prices is the last thing our economy needs at this time. Thankfully the Kiwi would head south with the commodity prices, much to the relief of other exporters in USD. The third potential source of negative NZ dollar news is the RBNZ's Monetary Policy Statement on 11 June. They have turned all doomy and gloomy on the economy again and can be expected to be less optimistic 2010 GDP growth than what they stated in March. "”"”"”"”"”- * Roger J Kerr runs Asia Pacific Risk Management. He specialises in fixed interest securities and is a commentator on economics and markets. More commentary and useful information on fixed interest investing can be found at rogeradvice.com
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