Weekly Outlook: Kiwi Schedule May Not Be Enough
In line, or sympathy, with the Australian dollar, the Kiwi was confined to consolidation over the course of the week. Fluctuating between the 0.6050 and 0.6100 figures, the underlying spot price had extremely little to be happy about on a thin schedule of fundamental releases. Now trading slightly above, some bullish momentum can be established by the upcoming releases. However, with the downward bias currently plaguing the major, sellers continue to look heavy on any intermediate pullbacks. Setting up for such upward pullbacks will be the NZIER business opinion survey.
Although declining in the most recent report, the second quarter sentiment should be slightly better as conditions have improved. Any potential upticks in the report would be in line with results from the most recent business confidence reports for the month of June. Remaining constant on the headline figure, there was a notable increase in the expected conditions component of the report. The number of businesses that are optimistic of future conditions rose to 17 percent from a 10 percent witnessed in the month of May. Additionally, there was significant improvement in the housing market sector report, which maintained high activity and interest. The business opinion survey should lead nicely into potentially higher retail sales figures, if an increase is possible. However, any positive effects look quite limited as consumer confidence, a suggestion of overall consumption declined in the month. For the third straight quarter, consumer confidence dipped to the lowest level in almost six years as expectations of slower economic growth has kept consumers at bay. Amidst all the overwhelming negativity, the ANZ business PMI may be the saving grace for the week, preceding the lesser considered bond holding report. Ticking higher in the month of May by almost 5 points, the survey may continue its winning streak after hitting the highest level of activity in nearly a year and a half. Notably, the new orders component also reflected a higher bias, rising to a one month high. With a higher figure, the survey may offer the underlying currency a temporary relief from the recent, perhaps overplayed bearishness. However, as mentioned, the temporary jump may also provide nothing but opportunities for short sellers, should disappointments be in store.
The week’s schedule was comparably shorter than the four releases pitted for the upcoming week. Being the sole release, the ANZ commodity price report garnered too little attention as most of the market was already set on the upcoming US-based data. For the month of June, commodity prices actually dipped 0.9 percent versus the previous 2.3 percent spike seen in May. Subsequently, the inflationary gauge was revised higher to 2.4 percent in the release. The decline, unexpected to say the least, was reflective of the pullback seen in the overall commodity markets as base metal and raw materials dipped in price. However, the figure was seen as an anomaly as prices are returning to pre-summer valuations, adding to already higher inflationary pressures in the economy. The eroding economic outlook, coupled with a horridly widening trade gap, is placing considerable bearishness on the Kiwi major in the short term. As a result, the inflationary suggestions may do little to spark any anticipation of rate hike in the near term as consumers and policy makers remain concerned over the future of the region.
