Intraday Market Thoughts

What’s Not to Like About The Kiwi?

by Adam Button
Nov 5, 2013 23:55

New Zealand reported stronger-than-expected employment numbers leading to another rally in the kiwi. On the day, the pound rode the services PMI to the best performance while CHF lagged. Australian trade data highlights a quiet Asia-Pacific session.

Early in Asia-Pacific trading, New Zealand reported a 1.2% q/q rise in employment compared to 0.5% expected. The unemployment rate also fell to 6.2% from 6.4% leading to a NZD/USD rise to 0.8376 from 0.8325. Earlier in the day, finance minster English said momentum is building in the economy.

It's awfully difficult to build a case against the New Zealand dollar. Foreign investment, especially in property is pouring in. The government is attempting to use regulation to cool housing but as long as Chinese money continues to look for an offshore haven, NZ will benefit.

There's a housing bubble? Well there's a housing bubble everywhere and if it cracks at least the central bank there has 250 basis points of ammunition if it wish to cut. In the meantime, Wheeler forecasts 200 bps of rate hikes in the next two years.

There will be periodic episodes of NZD selling on risk aversion and overbought conditions but any extended weakness will ultimately be countered by the flow of funds into the country.

Earlier in the day, the October ISM non-manufacturing survey hit 56.2 compared to 52.7 previously and the employment component was particularly strong. There was no sign of a shutdown slowdown and comments from Lacker that the impact of the 17-day govt closure was `purely transitional`, a statement that may ring true.

Up later, Australia releases trade balance data at 0030 GMT and is expected to show a $A500m deficit for September. Otherwise, the calendar is quiet.  

1 of the 2 existing EURAUD shorts reached 6 pips away from the final 1.4140 and therefore remains in progress. We started this week's Premium Insights with 2 trades in GBPUSD alongside 3 new charts ahead of Wednesday's industrial production figures, Thursday's BoE announcement and next week's crucial BoE inflation report. 
Act Exp Prev GMT
52.6 52.4 Nov 05 1:45
Trade Balance (SEP)
-450M -815M Nov 06 0:30
Employment Change (Q3)
1.2% 0.6% 0.4% Nov 05 21:45
Unemployment Rate (Q3)
6.2% 6.3% 6.4% Nov 05 21:45

Latest IMTs