NZ Dollar Outlook: Kiwi's fate this week in hands of RBNZ

Monday 1st February 2016

The New Zealand dollar's direction this week may be dictated by key Reserve Bank officials who will be setting the scene for the year with a series of forward-looking speeches.

The kiwi may trade between 63.50 US cents and 66.40 cents this week, according to a BusinessDesk survey of six currency analysts. Three thought it would gain, two bet it would fall and one picked it would be little changed. It recently traded at 64.72 US cents.

Reserve Bank governor Graeme Wheeler last week opened the door for further interest rate cuts as a worldwide oil glut depresses petrol prices and looks set to keep inflation outside the bank's target band for longer than expected. All eyes this week will be on his annual speech to the Canterbury Employers' Chamber of Commerce on Wednesday, titled 'The Global Economy, New Zealand's Economic Outlook, and the Policy Targets Agreement.'

"Governor Wheeler's annual sifting of the tea leaves speech is expected to be very balanced," ANZ Bank New Zealand economists said in their weekly research note. "We suspect he will reinforce the flexibility of the policy targets framework. It will again point to a central bank that while open to the idea of possibly having to ease again, is not close to pulling that trigger yet."

RBNZ assistant governor and head of economics John McDermott is scheduled to speak in Sydney on Thursday, on 'Forward guidance - enhancing monetary policy in New Zealand', followed by the bank's head of prudential supervision Toby Fiennes who will speak in Auckland on 'Taking Stock and Looking Ahead'.

To be sure, the kiwi's gyrations this week may also be at the mercy of global financial markets after the Bank of Japan unexpectedly adopted a negative interest rate policy last week.

Finance Minister Bill English is due to speak at a wharf opening at Lyttelton Port in Christchurch on Thursday.

The latest GlobalDairyTrade auction will also be keenly watched this week, although there's little optimism prices will pick up anytime soon.

Synlait Milk today lowered its forecast milk price for farmers for the 2015/16 season. That follows similar moves last month from Fonterra Cooperative Group, Westland Milk Products, and Open Country Dairy, as global commodity prices stay lower for longer.

"We are not optimistic on the near-term outlook for prices, with an ongoing supply-demand imbalance expected to persist for a while yet," ANZ said.

While NZX milk futures pricing currently suggests GDT prices will fall about 3 percent, the risk is for a larger decline, ANZ said.

ANZ publishes its monthly commodity price index tomorrow at 1pm.

Other data scheduled for release this week includes fourth-quarter labour market statistics on Wednesday and January vehicle registration details.

Elsewhere, the Australian Reserve Bank is expected to keep interest rates on hold tomorrow. Australia also has data on consumer confidence, trade, building consents, consumer and business confidence, and retail sales.

In the US, the key non-farm payrolls employment release is out on Friday, while China this week publishes gauges of manufacturing and services this week, and the Bank of England reviews policy and provides its latest forecasts for economic growth and inflation.

BusinessDesk.co.nz

Comments from our readers

No comments yet