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13 Nov 2014
Rates firm up in New Zealand and Australia – RBS
FXStreet (Barcelona) - The Research Team at RBS notes Rates firming up in New Zealand and Australia and highlight that cross trades against Europe may support their currencies.
Key Quotes
“In contrast to Europe, rates have crept up in New Zealand and Australia. New Zealand has posted firmer business confidence in recent weeks, including a rise in its manufacturing PMI from 58.8 to 59.3 in October, reported today, a new three month average peak since 2004 (58.3), recovering from a dip mid-year to around 53.5.”
“Earlier in the week, New Zealand retail sales were stronger than expected, continuing at a somewhat above trend rate of growth, and a solid reading of a transportation volume index (the ANZ Truckometer) was released. Last week, the employment data were strong for Q3.”
“However, New Zealand consumer confidence did ease further in November, reported this morning, down from 123.4 in Oct to 121.8, a low since October last year. The level now is around the average in 2005/2007 consistent with around trend growth.”
“The New Zealand 2 yr swap rates are up this week by round 7bp to 3.97%, supporting a recovery in the NZD.”
“Nevertheless, the still attractive yields in Australia may have encouraged demand on cross plays against the JPY, EUR and GBP. AUD and NZD crosses against the JPY are at their highs in over a year, and this may discourage buying from retail Japanese investors. However, both AUD and NZD cross charts against EUR and GBP are close to breaking above ranges since September. Given this is supported by relative interest rate trends, the risk is significant that these ranges break and drag in fresh buying.”
Key Quotes
“In contrast to Europe, rates have crept up in New Zealand and Australia. New Zealand has posted firmer business confidence in recent weeks, including a rise in its manufacturing PMI from 58.8 to 59.3 in October, reported today, a new three month average peak since 2004 (58.3), recovering from a dip mid-year to around 53.5.”
“Earlier in the week, New Zealand retail sales were stronger than expected, continuing at a somewhat above trend rate of growth, and a solid reading of a transportation volume index (the ANZ Truckometer) was released. Last week, the employment data were strong for Q3.”
“However, New Zealand consumer confidence did ease further in November, reported this morning, down from 123.4 in Oct to 121.8, a low since October last year. The level now is around the average in 2005/2007 consistent with around trend growth.”
“The New Zealand 2 yr swap rates are up this week by round 7bp to 3.97%, supporting a recovery in the NZD.”
“Nevertheless, the still attractive yields in Australia may have encouraged demand on cross plays against the JPY, EUR and GBP. AUD and NZD crosses against the JPY are at their highs in over a year, and this may discourage buying from retail Japanese investors. However, both AUD and NZD cross charts against EUR and GBP are close to breaking above ranges since September. Given this is supported by relative interest rate trends, the risk is significant that these ranges break and drag in fresh buying.”