Today’s Commentary
The Kiwi opens today down from last week, after being unable to push higher over the holiday weekend.
The weekend saw the USD regain some of its recently lost strength, as falling stock and commodity prices saw investor risk appetite subside. Driving the decline on Wall St was concern that the USD 8,000 tax credit for new home buyers would not be extended beyond its November 30 expiry date. Given the tepid stability gains the US housing market has made in recent months, the market is naturally concerned of the effect this policy change could have. Magnified by the natural investor aversion to the removal of any economic stimulus packages, the news sent ripples of discontent through the investment community – which in turn saw the Kiwi and other commodity currencies lose support.
Elsewhere the GBP continued its poor run of form as a worse-than-expected Q3 UK GDP figure saw the currency reverse its recent fight back. Friday’s data showed the UK economy contracted by 0.4% in the third quarter – more than the expected 0.2%, and more worryingly, despite the unprecedented levels of emergency stimulus spending. This marks the longest period of recession on record for the UK, and also indicates that the BoE will need to maintain its current level (at a minimum) of quantitative easing, removing any hope of a GBP recovery in the short to medium term.
Local attention is focused squarely on Thursday’s RBNZ cash rate announcement – whilst no one is picking a movement in the rate, it’s expected that the tone of the announcement will soften from an easing bias (i.e. “rates are low and will be for some time”) to a neutral one (i.e. “rates are low”), with the first upward movement still pegged for the first half of next year.
Upcoming Announcements:
• 27 Oct 2009: US S&P/Case Shiller home price index
• 27 Oct 2009: US Richmond Fed manufact index
• 28 Oct 2009: AU CPI
• 28 Oct 2009: NZ NBNZ Business confidence
• 28 Oct 2009: US Durable goods orders
By Chris Hunter, Corporate Dealer
Trackback: | Share this article:
