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NZ Dollar Outlook: Kiwi may trade in tight range in light data week

Monday 22nd February 2016

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The New Zealand dollar may trade in a tight range this week with a paucity of local data scheduled for release.

The local currency may trade between 65 US cents and 68 cents this week, according to 11 currency advisers surveyed by BusinessDesk. Five expect little change, four predict an increase and two say it may decline. It recently traded at 66.42 US cents.

The New Zealand dollar is being pushed around by the outlook for global interest rates, as speculation grows that the Federal Reserve won't hike rates as much as previously thought and negative rates are introduced by central banks in Japan, Europe, Switzerland, Denmark and Sweden, increasing the allure of the Reserve Bank of New Zealand's 2.5 percent benchmark. Locally, buoyant industries such as tourism and education are expected to offset declining exports for agricultural commodities.

"We continue to see the New Zealand dollar somewhat in limbo, caught between a reasonable economic story and global risks," ANZ Bank's New Zealand economics team said in a note.  "While New Zealand is showing resilience, we remain attuned to the risks."

In New Zealand this week, credit card data for January is released this afternoon. 

January tourism and migration data published on Thursday will be eyed to see if records continue to be broken.

"Even if there is some moderation, given that the New Zealand economy is still strong and the labour market is recovering again, it is hard to see what is really going to drive net migration meaningfully lower," ANZ said. "We expect migration to remain a pillar of the economy for some time yet, with associated demand and supply-side impacts."

January trade data to be released on Friday is expected to show a deterioration in the trade balance as falling commodity prices weigh on export returns while weaker oil prices push down the value of imports.

Also on the agenda this week, the Reserve Bank will publish its quarterly survey of households' inflation expectations tomorrow, and details of high debt mortgage lending on Thursday.

Finance Minister Bill English speaks to the Auckland Chamber of Commerce on Thursday, where he will set out the government’s economic approach midway through its third term, including its major focus areas and challenges for the coming year.

Elsewhere this week, a slew of speeches from Fed officials in the US will be closely watched for any signals on the outlook for interest rates. Late last week, a report showed that the US consumer price index, excluding food and energy, climbed by 2.2 percent over the past year, the biggest acceleration since June 2012. 

The US also has reports on housing, manufacturing, consumer confidence, and gross domestic product.

In the UK, Bank of England Governor Mark Carney is to testify to lawmakers tomorrow on the economy and monetary policy. Japan and Europe have inflation readings for January.

Meanwhile, Australia has reports on consumer confidence and capital spending this week.

BusinessDesk.co.nz



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