Kiwi losses blamed on the Aussie – 14th April 2016

Kiwi losses blamed on the Aussie

Yesterday it was the turn of…no, not Sterling…the NZ Dollar to prop up the currency leader board through no fault of its own.  To blame was the Australian employment data which came in stronger than expected with unemployment falling to 5.7% following the addition of 26,000 new jobs. Despite a marked swing from full-time to part-time employment investors saw the numbers as positive for the Aussie Dollar in that they reduced any downward pressure on interest rates.

But why should there be a fall in the NZ Dollar when Australian employment is positive? The suspicion is that the fall resulted from investors selling the NZ Dollar and buying into the Aussie Dollar. Overall the Kiwi weakened by a net one cent on the day while the Aussie went up by third of a cent.

At the top of the leaderboard was the South African Rand, helped by two sets of retail sales data but for entirely different reasons. A stronger-than-expected 4.1% annual increase in South African sales was positive for the economy while a -0.3% monthly fall in US sales appeared to support the case for a further delay in the Fed’s tightening cycle.

By any normal logic, the unexpectedly weak US retail sales data should have led to a lower US Dollar. However, that was not what happened: instead the US Dollar delivered the day’s second-best result, strengthening by more than a cent against the Euro and Sterling.

Sterling was left on the sidelines. The only UK ecostat was the RICS housing price balance, released at midnight. It came in at +42 on a scale of -100 to +100, not as strong as last August’s 53 but decent enough not to cause problems for the Pound. On the day Sterling was roughly unchanged against the euro.

Today Euroland consumer price index data this morning is expected to leave the provisional headline rate of inflation unchanged at -0.1%. The equivalent measure from the US, which comes out at lunchtime, is pencilled in at 1.2%. It is unlikely that the Eurozone figures will have any effect on the Euro unless they are wildly adrift from forecast to have any influence on European Central Bank policy. The US data, likewise, will probably make little difference to the US Dollar. The other non-event will be the Bank of England’s policy announcement at midday where is it expected interest rates will remain at 0.5% for the 86th month.