Forex Crunch New Zealand GDP Rises Nicely

Posted: 24 Jun 2010 01:51 AM PDT

New Zealand’s GDP rose by 0.6% in Q1 – more than expected. This prompts more rate hikes and a long term rise for NZD/USD.

Gross Domestic Product in New Zealand was expected to rise by 0.5%, and it surprised with a rise of 0.6%. It’s important to note that also the GDP for Q4 was revised to the upside – 0.9% instead of 0.8%, making the current rise even stronger.

In the past two quarters, New Zealand’s growth rate matches Australia’s – exactly the same growth rates. Among the differences between the countries, there’s a key difference in the interest rate: 4.5% in Australia and 2.75% in New Zealand.

New Zealand’s tightening cycle began with the initial raise from 2.5% to 2.75%, and it’s expected to continue. Alan Bollard, the governor of the RBNZ, hinted that this tightening cycle won’t be as strong as the previous ones, meaning that the interest rate won’t pass 8%, but there’s still a long way to go.

With the economy growing at this rate, also the interest rate will rise at a nice rate, without too many pauses.

As for NZD/USD, its moves will continue to be influenced by the general market moves as well as the local economy. Bad news from Europe sends traders to the “safe haven” currencies – the dollar, the yen and to some extent, also the Swiss Franc. The kiwi dollar, despite the sound economy, belongs to the other camp, of “risky currencies”.

But side by side with the rise in the interest rate and the improvement in the economy, the kiwi will enjoy carry trading – it will be bought by long term investors seeking to enjoying the higher yield.

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Forex Daily Outlook – June 24 2010

Posted: 23 Jun 2010 02:00 PM PDT

US Core Durable Goods Orders and US Unemployment Claims are the highlight of the day. Let’s review today’s activities:

In the US, The Core Durable Goods Orders measures the change in the total value of new orders for durable goods, excluding transportation appears to have considerable impact on the currency market expecting a rise of 2.2% from -1.1% in May while the less influential Durable Goods Orders is foreseen 3.8% drop from 2.8% in May.

More in the US, Unemployment Claims expected to go down by 11,000 following the unforeseen rise last week.

Finally in the US, Natural Gas Storage expected a drop 7B this week reaching 80B.

For more on USD/CAD, read the Canadian dollar forecast.

In Europe, French Consumer Spending believed to climb 1.5% from -1.2% in May. It seems like things start to brighten up for French consumers.

More in Europe, Industrial New Orders expected to drop to 1.6% from the 5.7% jump in the previous month.

Finally in Europe, Italian Retail Sales expected to decline by 0.6% reaching -0.1% and Italian Quarterly Unemployment Rate also support the retail sales decline by an increase forecast of 0.4%.

For more on the Euro, read the EUR/USD forecast and Casey Stubbs' latest analysis.

In Australia, CB Leading Index foreseen to remain 0.3% following the improvement in May.

For more on the Aussie, read the AUD/USD forecast.

In New Zealand, Trade Balance surplus continues to climb by 154B, reaching a fantastic figure of 810M which is great for market activity.

In Japan, Tokyo Core CPI expected to go up by 0.1% to -1.5% which correlates with the anticipated rise of 0.2% in the National Core CPI.

That’s it for today. Happy forex trading!

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