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NZD/USD daily chart, June 14, 2018
Kiwi Notes 1

Earlier in the Day:

After a relatively quiet start to the week on the data front, stats were on the heavier side through the Asian session, with economic data released including building consents and business confidence numbers out of New Zealand, retail sales figures out of Japan and building approval and private new CAPEX numbers out of Australia.

For the Kiwi Dollar,

Building consents slumped by 10.3% in July, following on from June’s downwardly revised 8.2% slide, adding to concerns over the construction sector.

The Kiwi Dollar moved from $0.67124 to $0.6710 upon release of the figures that came ahead of the business confidence numbers.

The August ANZ Business Confidence survey saw a net 50.3% of respondents expecting economic conditions to deteriorate over the next 12-months, deteriorating from a net -44.9% in July.

  • A net 4% of those surveyed had a positive outlook on their own prospects, though this sits well below the long-term average of +27%.
  • The manufacturing sector had the least positive sentiment towards their own activity, down 11 points to -4%, while retail and services saw some improvement.
  • For the manufacturing sector, the negative elements stem from businesses exposed to domestic construction, with export related businesses seeing expectations hold steady.
  • A net 5% of firms are expecting to reduce investment, with employment intentions falling by 8 points to -6%.
  • Profit expectations remained unchanged at -17%, with retail and manufacturing sectors the weakest at -17% and -28% respectively.
  • A net 36% of businesses expect it to be tougher to get credit, with firms’ pricing intentions falling by 2 points to +27%. Inflation expectations were flat at 2.2%.

The Kiwi Dollar slid from $0.67079 to $0.66768 upon release of the figures, before easing to $0.6655, down 0.91% for the session.

For the Japanese Yen, following softer household confidence figures released on Wednesday, July retail sales rose by 1.5%, coming in ahead of a forecasted 1.2%, while just shy of June’s 1.7% rise.

The Japanese Yen moved from ¥111.68 to ¥111.726 against the Dollar upon release of the figures before rising to ¥111.62 at the time of writing, up 0.05% for the session.

For the Aussie Dollar,

July building approvals slid by 5.2%, which was worse than a forecasted 2.5% fall, reversing most of June’s 6.8% rise, according to figures released by the ABS.

The fall in total dwellings was attributed to a 6.6% slide in the approval of private dwellings excluding houses, while approvals for private houses fell by 3%.

Private new capital expenditure for the 2nd quarter fell by 2.5%, quarter-on-quarter, which was worse than a forecasted 0.6% rise, following a 1st quarter upwardly revised 1.2% increase. Year-on-Year, total new CAPEX rose by 0.4%, according to figures released by the ABS.

  • New CAPEX on buildings and structures slid by 3.9%, quarter-on-quarter and by 4.7% year-on-year.
  • New CAPEX on equipment, plant and machinery fell by 0.9% quarter-on-quarter, while rising by 6.9% year-on-year.

The Aussie Dollar moved from $0.7299 to $0.72835 upon release of the figures, before rising to $0.7286 at the time of writing, down 0.39% for the session.

In the equity markets, it was another mixed bag, with the CSI300 and Hang Seng down 0.76% and 0.74% respectively, at the time of writing, while the Nikkei and ASX200 enjoyed another positive start to the day, with gains of 0.16% and 0.13%, though a stronger Yen and some disappointing data out of Australia pinned back the majors, with falling metal prices adding further downward pressure on the ASX200.

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The Day Ahead:

For the EUR, economic data out of the Eurozone includes prelim August inflation figures out of Spain and Germany, along with the all-important August unemployment numbers also scheduled for release out of Germany.

While concerns over a prolonged trade war and ramifications for the Eurozone and global economies have tempered sentiment towards ECB monetary policy, the week’s conclusion and agreement between the U.S and Mexico and progress between the U.S and Canada may ease concerns of an economic meltdown and a need for the ECB to reverse its stance on policy.

The upside through the week could be under pressure should today’s stats disappoint, the key driver being Germany’s unemployment change numbers, though expect inflation figures to also influence.

At the time of writing, the EUR was down 0.08% to $1.1698, with today’s stats the key driver through the day, though there is always the threat of Oval Office influence through the day, as the markets look for progress between the U.S and Canada on trade.

For the Pound, it’s another quiet day ahead on the data front, leaving the Pound in the hands of Brexit chatter.

Following some upbeat comments from the EU’s chief negotiator on Wednesday, the hopes of a deal before mid-November have improved and with it, the prospects for the Pound.

While volatility is likely to continue as the deadline approaches, optimism from Wednesday’s comments could continue through to the end of the week, with a lack of stats to influence, though we can expect more comments between now and Friday’s close.

At the time of writing, the Pound was up 0.04% to $1.3031, with the continued focus on Brexit expected to influence the Pound.

Across the Pond, economic data out of the U.S includes the weekly jobless claims and July personal spending figures, with the FED’s preferred Core PCE Price Index numbers for August also scheduled for release.

While we can expect some influence from the personal spending numbers, the inflation figures will likely be the main driver for the Dollar, anything in line with or better than forecasted being Dollar positive.

Offsetting any upside for the Dollar could be continued progress on trade talks between the U.S and Canada, with chatter of an end of week conclusion to talks.

At the time of writing, the Dollar Spot Index was down 0.01% to 94.591, with today’s stats and the ever present Oval Office the key drivers through the day.

For the Loonie, following a relatively quiet week on the data front, 2nd quarter GDP numbers due out this afternoon will provide direction, while progress on trade talks will also be in focus.

At the time of writing, the Loonie was down 0.12% to C$1.2923 against the U.S Dollar, with trade chatter the key driver through the day, while the GDP numbers will provide some guidance on where the BoC sits on policy should the Canadian government manage to garner a favourable trade deal.

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