NZD/USD Monthly Fundamental Forecast August 2012

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Outlook and Recommendation

The NZD/USD ended the month at 0.8089 having hit a high of 0.8122.

A neutral stance at the RBNZ and an increase in risk appetite and improving investor sentiment has supported the NZD rally off its lows. However, the currency remains vulnerable and we favor it less than a currency like AUD. Accordingly, we hold a relatively bearish outlook, expecting it to close the quarter at 0.76. 

Highest: 0.8122

Lowest: 0.7809

Difference: 0.0313

Average: 0.7988

Change %: 0.72

After strong growth of 2.5% y/y in the first quarter (driven mainly by the manufacturing sector), recent key economic indicators suggest that in the second quarter, economic activity moderated somewhat. Australia and China, New Zealand’s major trading partners, have confirmed a moderation in growth for the second quarter, while some commodity prices have stabilized in recent months, indicating less promising conditions for the country’s economic outlook. At its last monetary announcement in July, the central bank left the official cash rate unchanged at 2.5% on account of a weaker economic profile due to international demand coming from Asia and European concerns and low inflation. With this, the central bank accumulates more than a year and a half of with record-low interest rates. Inflation for the second quarter of the year increased by only 1.0% y/y, the lower end of the central bank’s tolerance range and the slowest pace since 2000.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.

 

Central Bank Name: Reserve Bank of New Zealand

Date of next meeting or last meeting: Sep 13

Current Rate: The Reserve Bank left the Official Cash Rate (OCR) unchanged at 2.5 %

Statement highlights of last meeting: The Reserve Bank today left the Official Cash Rate (OCR) unchanged at 2.5 percent. Inflation has settled near the middle of the Bank’s target range, and inflation expectations have fallen. The domestic economy is showing signs of recovery.  Household spending appears to have picked up over the past few months and a recovery in building activity appears to be underway.  That recovery will strengthen as repairs and reconstruction in Canterbury pick up later in the year. High export commodity prices are also helping to support a continuing recovery in domestic activity.

Economic events for the month of August affecting AUD, JPY and NZD

Date

Time

Currency

Event 

Forecast

Previous

Aug 2

1:30

AUD

Retail Sales m/m

0.6%

0.5%

 

1:30

AUD

Trade Balance

-0.38B

-0.29B

Aug 7

4:30

AUD

Cash Rate

3.50%

3.50%

 

4:30

AUD

RBA Rate Statement

  
 

23:50

JPY

Current Account

 

0.28T

Aug 8

22:45

NZD

Employment Change q/q

 

0.4%

 

22:45

NZD

Unemployment Rate

 

6.7%

Aug 9

1:30

AUD

Employment Change

 

-27.0K

 

1:30

AUD

Unemployment Rate

 

5.2%

Aug 10

1:30

AUD

RBA Monetary Policy Statement

  

Aug 13

22:45

NZD

Core Retail Sales q/q

  

Aug 15

3:00

NZD

Inflation Expectations q/q

  
 

22:45

NZD

PPI Input q/q

  

Aug 21

1:30

AUD

Monetary Policy Meeting Minutes

  

Aug 30

1:00

NZD

NBNZ Business Confidence

  
 

1:30

AUD

Private Capital Expenditure q/q

  

 

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About:FX Empire Analyst - Barry Norman

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