AUDNZD…Rallies on weaker than expected inflation data
The Australian Dollar (AUD) has been under pressure for over two months now against the New Zealand Dollar (NZD) for a number of reasons; one being the interest rate stance held by the RBNZ (Reserve Bank of New Zealand) that has remained hawkish throughout 2014.What has also been interesting is the rhetoric by Graeme Wheeler, the head of the RBNZ, who has hinted at continued interest rate hikes deep into 2015.
Of course as we all know this is always dependant on current economic data supporting that stand. One thing that has stood out over the last fortnight is the Australian Dollar has stopped selling off on bad news and has stabilised at worse and risen at best on good news. This was no more apparent than last week when the unemployment numbers out of Australia hit them out of the park, with a reduction in the Unemployment Rate by 0.2% to 6.1% from 6.3%. Another interesting factor has been the institutional volume on the sell side dried up while the volume on the buy side dramatically increased.
What this means is, the big money was slowly accumulating the AUDNZD cross while retail was still trying to sell it. This tells us that, all we needed was another economic catalyst and the AUDNZD should start to rally just as the Australian Dollar has done against both the Pound and the Euro and to a lesser degree the Canadian Dollar. We received this this morning with a lower than expected inflation rate out of New Zealand, coming in at 0.8% from an expected 0.9% and a November reading of 1%. The AUDNZD put on a tad over 1.25%. Expectations of future moves to the upside in NZ interest rates suddenly reduce which makes the Aussie Dollar now seem much more attractive.
AUDNZD… Chinese GDP and Industrial production provides a lift to the Aussie Dollar
Marry this with better than expected GDP and Industrial Production data out of China yesterday and we now have the fuel that could ignite a short term change in trend in the Dollar. Industrial Production is exactly that, a gauge on the output of the Industrial sector which includes utilities, mining and manufacturing. This along with GDP helped to turn around one of the largest Chinese stock market corrections in 6 years as this data showed the nation’s economy grew faster than expected.
Elsewhere German economic sentiment or ZEW rose beyond expectations in January brushing off Euro Zone fears of deflation and an up and coming Greek election with the leader in the polls being the anti bailout party Syriza. Some of the reasons for the better than expected sentiment was the ever decreasing prices in crude and a falling Euro which has provided much needed relief for exporters. This failed to provide any assistance to the Euro however with a miniscule rally overnight .