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Monthly Currency Update - GBP/NZD August 09

Monthly Currency Update - GBP/NZD August 09

Old Aug 4th 2009, 7:41 pm
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Default Monthly Currency Update - GBP/NZD August 09

Hi All,

Here is an overview of what’s been happening in the Currency Markets throughout July with the New Zealand Dollar.

The Kiwi started the month weighed down by fresh doubts of a global recovery as a weak US jobs report set the tone for markets worldwide, putting equities and higher-yielding currencies under pressure.

The local Dollar was little changed after New Zealand posted its fourth consecutive monthly trade surplus in May while the housing sector showed further signs of improvement, suggesting the economy is slowly pulling out of its longest recession on record. Rising dairy exports, combined with a sharp fall in imports due to recession, lifted the country’s trade surplus to NZD858 million in May, the largest since June 1993. The number of new dwelling consents approved also rose as the housing sector showed signs of levelling out amid low interest rates, after sharply declining over the past 19 months.

The Institute of Economic Research’s release of its quarterly survey of business confidence, highlighted that a net 25% of firms expect business conditions to deteriorate in the next six months, a sharp improvement on the previous quarter when 65% of respondents expected deterioration. The survey supports previous data that has suggested the worst of the recession may now be over and that growth could return by the end of 2009.

Some other positive data was May’s retail sales data (+0.8%m/m) which is the latest sign that the economy is beginning to recover from it’s worst ever recession.

With mid July’s data calendar lacking inspiration, the NZD took its lead from the equity markets which rallied aggressively following a number of stronger than expected US corporate earnings results. This kept the NZD on the front foot despite as series of disappointing second tier data releases which showed a sharp drop in visitor arrivals (particularly from Asia) and a plunge in credit card spending as consumer confidence remained weak.

The Kiwi slumped across the board last Thursday, hurt after New Zealand’s Central Bank threatened to cut interest rates further because a strong currency was putting the fragile economic recovery at risk. The Reserve Bank of New Zealand issued the latest warning after leaving its policy rate at a record low of 2.5% for a second consecutive month, as expected. It also repeated its pledge to keep the rate low until late next year to help lift the economy out of its worst recession on record. Policymakers, including Finance Minister Bill English and RBNZ Governor Allan Bollard, have repeatedly highlighted the urgent need for a weaker Kiwi to boost exports, which have struggled amid the stronger currency and a slump in global demand.

In New Zealand this week, attention will likely focus on Thursday’s Q2 unemployment rate, seen rising to 5.7%, with employment moderately lower due to the delayed impact from the Q408/Q109 slowdown in activity.

Current Central Bank Rates:

New Zealand (Reserve Bank): 2.5% (Next Meeting 10th September)
UK (Bank of England): 0.50% (Next Meeting 6th August)

Highs & Lows of July:

High: 2.6106
Low: 2.4851
Movement of 5.05%

Difference this would make on £200k

High: 522,120 NZD
Low: 497.020 NZD

A difference of 25,100 NZD.

Whilst FX isn't the most thrilling of subjects, the sooner you begin to think about your money transfers, the more likely you are to make your money go further.


Mark Bodega
Director - HiFX
Windsor2 is offline  

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