Australian Dollar Update:
RBNZ Deputy Governor Spencer announced on Thursday to a Credit Suisse Asian Investment Conference in Hong Kong that the monetary policy tightening cycle “might have needed to be more accentuated,” had the limits on low-deposit home loans not been in place.
He then went on to say that these limits will be removed once housing market pressures have settled. Spencer then went on to talk about the rebuilding of Christchurch adding to inflationary risk. He also noted that many New Zealand exporters have adjusted to the high Kiwi Dollar exchange rate and that the RBNZ is happy with the current policy framework.
Hours before this announcement the AUD/NZD pairing had reached a 2 week high of 1.07584. The market had reacted positively to comments from Governor Stevens suggesting the current easing cycle had achieved its goal and that he might be in favour of raising interest rates in 2015. Yesterday was a different story. It was the Kiwi’s turn and after the speech from RBNZ Deputy Governor Spencer the NZD reacted almost immediately against all its major trading partners, reversing the Gains made by AUD the day before.
However, the Australian Dollar will take solace from the fact that the AUD has finally broken above 0.91 against the USD, a level that had held it in check for the last four months. BNP Paribas has now come out with a target of 0.9550 for AUD/USD, which with the speed and power of its recent breakout does not seem quite as unattainable as it did just a few weeks ago.
Last night we had U.K Retail Sales figures out for February with the year on year figure posted as 4.2%, well above the expected 2.9%. This positive data for the UK economy did nothing, however, to stop the recently rampant AUD, with the AUDGBP seeing further gains.
On the other side of the Atlantic US GDP and Initial Jobless claims are released around midday EST. GDP figures are one of the primary indicators that gauge the health of a country’s economy, the market will focus their attention on this announcement to see if the Americans are reaping the benefits of a sustained flood of liquidity, commonly known as Open Ended QE. The U.S Dollar will be the main beneficiary if the analysts forecasts of an annualised target of 2.7% are reached. We also see the Same GDP figures released from the UK this evening at 8:30, along with European Consumer Confidence at 12am…..setting us up potentially for an interesting end to the month.