Nzdusd - page 27

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RBNZ announce NO CHANGE in cash rate Reserve Bank of New Zealand moentary policy meeting outcome Official Cash Rate remains on hold at 2.75%

  • Further easing seems likely, depends on data
  • Sharp fall in dairy prices weighing on farm incomes
  • Growth in services is robust
  • House price inflation in Auckland remains strong
  • Says that if the NZD keeps moving up this would require a lower rate path
  • RBNZ concerns about China and Asian growth
  • Recent rise in dairy prices is helping business and consumer sentiment

That comment on the New Zealand dollar is quite pointed, that's the most significant thing I've seen in the statement so far. Everything else is pretty much on script and as expected. The currency comment is indicative of RBNZ concern over a rising NZD and is a hint at the potential for RBNZ intervention. The RBNZ have very clear guidelines on when they will intervene.

The RBNZ easing bias remains, no surprise there. No guarantee that there will be a cut in December, the next meeting (the 10th).

source

 

Morgan Stanley Chart Of The Week: Selling NZD/USD Morgan Stanley picks NZD/USD as its technical FX chart of the week, where MS is bearish with a fresh short position. MS provides the levels and targets, where traders should place their stops and targets for this trade.

On long-term NZD/USD chart:

"NZD/USD has begun to retrace its large decline from the high of 0.8844. We believe that the pair is currently in a (c)-wave, part of a larger b. For long-term trades would use a rebound to sell as the longer-term downtrend remains. We target 0.56 for the end of next year," MS projects.

On 2-year NZD/USD chart:

"We believe that NZDUSD is retracing part of its recent uptrend. Should the wave count be correct then a move below the 3-wave low of 0.6130 is expected. Short NZD positioning according to our tracker is fairly light. The risk to our bearish trade is a move back above the 0.6897 high as this suggests the retracement is incomplete," MS adds.

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NZ finmin English weekend comments - interest rates may fall further Weekend comments from New Zealand finance minister Bill English crossing the Bloomberg from a TV NZ interview.

  • Interest rates may have further to fall
  • Rates will stay lower for longer

These will be a negative input for the NZD at the week's opening, though they are not overly surprising sort of comments. English is on the record scolding the Reserve Bank of New Zealand for not doing more to boost inflation in NZ.

 

NZ data - Q3 employment change +1.5% y/y (expected +2.5%) Quarterly employment figures from New Zealand, for Q3 2015 Unemployment rate for Q3 6.0%

  • expected 6.0%, prior was 5.9%

    • Employment change -0.4% q/q

    • expected +0.4%, prior was +0.2%, revised from +0.3%

      • Employment change +1.5% y/y

      • expected +2.5%, prior was +3.0%

        • Participation rate 68.6%

        • expected 69.3%, prior was 69.3%

        Average hourly earnings +0.9%

      • expected +1.1%, prior was 1.2%

      Private wages including overtime for +0.4%

    • expected 0.5%, prior was 0.5%

    Private wages excluding overtime +0.4%

  • expected 0.5%, prior was 0.5%

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A miss on the numbers, and the NZD marked lower to touch below last night's lows

The q/q fall in employment is the first for 3 years, following the softening in dairy prices, farm incomes and business confidence/conditions.

This result will give added kick to RBNZ rate cut expectations. Inflation is very, very low in NZ, and now employment is falling. Dual mandate anyone?

NZD will be a sell into rallies I should think. For the ditch cross traders, AUD/NZD rallies should continue.

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RBNZ financial stability report: Financial risks have risen Highlights of the RBNZ bi-annual financial stability report:

  • Dairy slowdown and high Auckland house prices are key economic risks
  • China slowdown seen having potential major impact on New Zealand via lower commodity prices
  • Sees less scope for monetary easing to offset sharp rise in funding spreads
  • Has responded to increased volatility in money markets by increasing participation
  • Too early to judge effectiveness of new macro policies on Auckland housing
  • Recent NZD weakness a significant buffer for economy
  • Transmission of RBNZ mon pol affected by fewer market makers in FX swap market, low bank risk appetite. In response, RBNZ has increased participation through open market operations and FX swaps.

Not exactly a ray of sunshine but it's tough to be upbeat when you're talking about risks.

The bolded headline is a bit of puzzle. I'm not exactly sure what they're saying here and I'm looking for the full text but anytime a headline reads 'less scope for monetary easing', it's a bullish knee jerk.

RBNZ Governor Wheeler is scheduled to speak 5 minutes after the release of the report.

NZD/USD was trading at 0.6522 ahead of the data and fell to 0.6501 on the first headlines but it later completely retraced.

 

New Zealand data - Manufacturing PMI for October: 53.5 (prior 55.4) Business NZ manufacturing Purchasing Managers' Index (PMI) for October In at a dip to 53.5

  • prior 55.0, revised from 55.4

    • Comments from BNZ Senior Economist Doug Steel on the PMI:

  • "it was interesting to see a decline in inventory this month especially in the context of new orders remaining above-average - it's a signal for more production ahead"
  • Production continues to expand, albeit at a slower pace in October
  • We are not reading too much into the monthly slow down at this point. It is only one month and it follows a couple of stronger months
  • Construction outlook remains buoyant. Don't fret over the 5.7% decline in residential building consent numbers for September, following their 5.3% fall in August. These need to be seen in the context of a 20% jump back in July. The trend is upward.
 

Im bearish on this

 

NZ Retail Sales ex Inflation for Q3: +1.6% q/q (expected +1.4%) New Zealand data ... Retail Sales ex Inflation for Q3

  • expected +1.4% and prior was +0.1%

    • Q3 actual retail sales +5.7% y/y (5.6% expected)

    From Stats NZ:

    Ten of the 15 retail industries had higher seasonally adjusted sales volumes. The largest industry movements were:

  • motor-vehicle and parts retailing, up 5.0 percent
  • electrical and electronic goods, up 6.6 percent
  • food and beverage services, up 2.4 percent.

Several NZ motor vehicle retailers report they are on track for a record sales year

 

Look unstable.

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