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NZ Dollar Outlook kiwi may fall on US employment, Europe woes

Monday 9th July 2012

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The New Zealand dollar faces downward pressure this week as investors search for fresh clues on the pace of global growth after US employment figures missed estimates and Europe struggles to find a credible solution to its debt crisis.

The New Zealand dollar recently traded at 79.65 US cents, little changed from 79.61 cents at 8am. That's right in the middle of this week's predicted trading range of 78.40 cents to 80.80 cents, according to a BusinessDesk survey of five analysts.

Three of the five analysts surveyed predict the kiwi will finish the week lower, two higher. The New Zealand dollar fell from its two-month high after America employment figures missed forecasts on Friday.

That reignited fears the world's biggest economy isn't recovering as quickly as expected. The US added 80,000 jobs in June after a revised gain of 77,000 in May, according to Labor Department data. A Bloomberg survey had predicted an increase of 100,000.

"We have obviously got a risk-off scenario as we start the morning after Friday and that will probably continue throughout the week," said Stuart Ive, currency strategist at HiFX. Investors will be eying Wednesday's June Federal Open Market Committee minutes for fresh clues about whether the US central bank is prepared to consider additional steps to spur growth and employment.

"There will be no more advances on Q3 thinking," said Imre Speizer, market strategist at Westpac Banking Corp. "There hasn't been enough bad data; it's just been disappointing, but not bad."

The New Zealand dollar continues to hit record highs against the euro after central bank meetings last week did little to boost sentiment. The European Central Bank cut its key interest rate by 25 basis points to a record-low 0.75 percent, while the Bank of England raised its asset-purchase target by 50 billion pounds to 375 billion pounds.

The kiwi rose as high as 65.07 euro cents this morning. That's the highest it's traded against the European single currency since the euro entered circulation in 2002. It recently traded at 64.96 euro cents. "The New Zealand dollar is basically just a rocketship going up the charts," Ive said.

"The euro is under massive amounts of pressure since we are seeing massive indecision out of Europe." "On the upside, there is nothing to stop it continuing on this pattern," he said.

European policymakers are doing their best to shore up global confidence with finance ministers meeting on Monday to confirm details from the Brussels summit after leaders agreed to use the euro-zone’s bailout fund to support Spain's bank sector.

China, New Zealand's second largest export market also unexpectedly cut its key interest rate for the second time in a month on Thursday. That comes before the release of gross domestic product, retail sales and industrial production data this week.

America's next round of corporate earnings starts this week, with Alcoa and JPMorgan Chase. Analysts are picking that earnings will be affected by Europe's inability to contain its debt crisis. New Zealand's earnings season will set start in late July.

The National Australia Bank is set to release its latest business confidence survey for New Zealand's largest export market on Tuesday, followed by employment figures on Thursday.

The New Zealand dollar is little changed on 78.11 Australian cents from 78.04. New Zealand data set for release this week includes electronic card transactions, the accommodation survey and the food price index from Statistics New Zealand.

The New Zealand Institute of Economic Research's June quarterly survey of business opinion is out tomorrow, while the ANZ-Roy Morgan Consumer Confidence and Bank of New Zealand - Business NZ Performance Manufacturing Index will be release on Thursday.

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