The Kiwi Dollar continues to give up ground to the Australian Dollar in what is now fast approaching a 9 month high. We talked about this in an article back in July just after the AUDNZD found support and then turned a corner to begin this rally which now sits a tad over 500 pips.
The catalyst for this rally came from the expectation by the market that the New Zealand economy was going to struggle going forward to outperform expectations with the constant stream of positive economic data that had been coming out of the Land of the long white cloud of late. Also the remaining three potential Interest rate hikes that RBNZ Governor Brian Wheeler had signalled to the market to expect for the remainder of 2014, may fail to eventuate unless the economic data supported it.
And that’s exactly how it played out; he raised Interest Rates at the last meeting to 3.5% but hinted that rates would now remain on hold for the foreseeable future until market conditions supported further hikes. The market had already factored into the KIWI Dollar all the good news and so down she went and the Aussie was the beneficiary.
Over in Germany last night they have the opposite problem, the largest economy in the Euro Zone struggling to support its neighbours with a Central Bank Chief Mario Draghi remaining clueless about how to restart an economy that remains in the doldrums post 2008 GFC.We had Consumer Confidence out of Germany last night, missing forecasts with a print of 8.6% from an expected 8.9% meanwhile over in the U.S mortgage approvals doubled to 2.8% from the previous months reading of 1.4%
A domestic calendar that is light in news today, with New Home Sales set to be released at 11.00 AEST.Back across the Atlantic we have a high level release with German Unemployment Change and Unemployment Rate set to be released just after the open of the U.K- Euro trading session. We shouldn’t expect too many surprises if Mario Draghi’s speech at the annual Jackson Hole symposium in the weekend was anything to go by.
A Central Banker who a little over two years ago gave a speech with the promise of ‘’we will do whatever it takes’’ to save the Euro Zone from recession should now be entitled ‘’ we have no idea what it takes’’.