NEW ZEALAND ECONOMICS MARKET FOCUS - ANZ ......2015/07/27 · -trend pace as previous supports...

NEW ZEALAND ECONOMICS

MARKET FOCUS

ANZ RESEARCH

27 July 2015

INSIDE

Economic Overview 2

Interest Rate Strategy 6

Currency Strategy 8

Data Event Calendar 10

Local Data Watch 12

Key Forecasts 13

NZ ECONOMICS TEAM

Cameron Bagrie Chief Economist Telephone: +64 4 802 2212 E-mail: [email protected] Twitter @ANZ_cambagrie Philip Borkin Senior Economist Telephone: +64 9 357 4065 Email: [email protected]

David Croy Senior Rates Strategist Telephone: +64 4 576 1022 E-mail: [email protected] Peter Gardiner Economist Telephone: +64 4 802 2357 E-mail: [email protected] Mark Smith Senior Economist Telephone: +64 9 357 4096 E-mail: [email protected] Sam Tuck Senior FX Strategist Telephone: +64 9 357 4086 E-mail: [email protected] Con Williams Rural Economist Telephone: +64 4 802 2361 E-mail: [email protected] Sharon Zöllner Senior Economist Telephone: +64 9 357 4094 E-mail: [email protected]

A LEAP OF FAITH

ECONOMIC OVERVIEW

We are broadly in agreement that four OCR cuts is about par given sharp falls in

dairy prices, low inflation and signs of slowing momentum in the economy.

However, we still see a high chance of a “pause that refreshes”, which we are

pencilling in after a third RBNZ cut in September. Monetary policy is as much art

as science; it’s about feeling your way. Local data this week is likely to be

overshadowed by a Graeme Wheeler speech expected to give an update the

Reserve Bank’s thinking about the state of the economy and inflation, but the

latest read on ANZ business confidence will also be key.

INTEREST RATE STRATEGY

While the RBNZ maintains an easing bias, their rhetoric doesn’t exactly scream of

being in a hurry to get the OCR back to 2.50%. Amid market talk of 50bp cuts

and with positioning long, some retracement in market pricing is likely in coming

weeks. This, and strong ongoing demand for yield at the back end of the curve

should contribute to curve flattening. Despite the Fed moving closer to lift-off,

gradualism, global policy support, and a negatively skewed risk profile should cap

long-term global yields. Outright yields and spreads, for local yields have

narrowed considerably of late, but there is scope for local yields to move lower

still.

CURRENCY STRATEGY

The trend for NZD remains lower and we agree with the RBNZ description of

depreciation as being “necessary”. US events this week should support USD, but

markets look very well positioned for such a result, suggesting some

consolidation for NZD/USD over coming weeks is likely despite our six month

trend view remaining down. The downside risks for kiwi remain in global

commodity prices, with recent AUD/USD price action a warning against expecting

too much stability. Weak AUD/USD price action is expected to keep supporting

the NZD/AUD.

THE ANZ HEATMAP

Variable View Comment Risk profile (change to view)

GDP

2.7% y/y

for 2016

Q2

Economic momentum is running at a sub-trend pace as previous

supports begin to wane.

Unemployment

rate

5.7% for

2016 Q2

The demand for labour is slowing, while labour supply remains

strong. Wage inflation contained.

OCR 2.50% by

Jun 2016

The RBNZ is now responding to a weaker macro backdrop. We

expect a full reversal of the 2014 rate hikes.

CPI

1.7% y/y

for 2016

Q2

Sub-1% annual inflation over 2015. Benign global inflation backdrop; domestic pricing pressures contained so far.

Positive Negative

Neutral

Positive Negative

Neutral

Up Down

Neutral

Positive Negative

Neutral

mailto:[email protected]






ANZ Market Focus / 27 July 2015 / 2 of 16

ECONOMIC OVERVIEW

SUMMARY We are broadly in agreement that four OCR cuts is

about par given sharp falls in dairy prices, low

inflation and signs of slowing momentum in the

economy. However, we still see a high chance of a

“pause that refreshes”, which we are pencilling in

after a third RBNZ cut in September. Monetary policy

is as much art as science; it’s about feeling your way.

Local data this week is likely to be overshadowed by

a Graeme Wheeler speech expected to give an

update the Reserve Bank’s thinking about the state of

the economy and inflation, but the latest read on ANZ

business confidence will also be key.

FORTHCOMING EVENTS RBNZ Governor Wheeler speaking on the economy (9:00am, Wednesday, 29 July). We expect

the Governor to take the opportunity to provide an

update on the Bank’s view of the outlook given

developments since its June MPS.

Building Consents – Jun (10:45am, Thursday, 30

July). Nationwide dwelling consent issuance has been

flat-lining. However, the composition is shifting.

Auckland is trending higher; Canterbury is falling. We

expect a small gain overall in June, but uncertainty is

high.

ANZ Business Outlook – Jul (1:00pm, Friday, 31

July).

RBNZ Credit Aggregates – Jun (3:00pm, Friday,

31 July). Overall credit growth is accelerating. While

this in part reflects stronger housing credit growth, it

also reflects cash flow pressures in the agricultural

space.

WHAT’S THE VIEW? Two OCR cuts down, at least one to go (in the near-term). The RBNZ has delivered two 25bps rate

cuts as we expected and at this stage the third looks

odds-on for September as per our core view. Dairy

prices show little signs of basing.

The economist fraternity consensus is that we’ll see four in a row with a fourth cut in October; we’re non consensus, and see a “wait and see” pause. There are five key reasons.

Our assessment is that the economy is still doing okay. There are obvious risks and more of

them point down than up but they are risks, not

current reality.

Financial conditions have loosened a lot; our

financial conditions measure has proven to be

pretty adept at picking turning point in the

economic cycle. It’s suggesting solid growth even

taking into account lower commodity prices, and

there’s no obvious reason to discount it.

FIGURE 1. GDP VS. FINANCIAL CONDITIONS INDEX

Source: ANZ, Statistics NZ, Bloomberg

Monetary policy is an art based on “feeling your way” – the RBNZ is going to have to take a pause to assess at some stage. Monetary policy works with a lag; it’s not about

slavishly following lagging hard data.

With the RBNZ fixated on the NZD they are also facing a balancing act on keeping its direction downwards (assuming commodity

prices halt their free-fall). They have got some

runs on the board by easing, but the promise of

more to come helps to keep the momentum. The

July Review did that, but firing four bullets right

up front and sitting back risks policy running out

of currency ammunition. This is where the tactical

considerations come in. Of course, as the RBA

found earlier in the year, the currency market

doesn’t always tolerate being teased for an

extended period.

There are good reasons to worry about the OCR heading too far, too fast, as we pointed out last week. Yes, we know the RBNZ has an

inflation target; interest rates have been heading

lower in response to low [core] inflation. But you

can’t completely ignore the Auckland property

market (although we do note the Government are

proposing further measures) or increasing

household debt. Of course purists will note that’s

the realm of prudential policy, but they do

overlap – giving with one hand and taking away

with the other can only be pushed so far before it

becomes self-defeating.

All this is of course subject some major assumptions holding true:

Global challenges and particularly China’s economic challenges remain contained. To

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GDP (LHS) FCI (adv 10 mths, RHS)


ECONOMIC OVERVIEW

be honest, there’s a fairly high probability that

they won’t.

Dairy prices don’t become even more disconnected from the NZD.

Inflation doesn’t keep falling (according to the core measures). Headline inflation will

certainly rise courtesy of the lower NZD. And the

RBNZ still appears surprisingly strongly wedded

to the view that low inflation is NZD and petrol

dominated. That doesn’t cut the mustard when

you look at core inflation (1.3% y/y), non-

tradable inflation (at 2% y/y, a 14-year low) and

inflation ex food, energy and petrol (+0.9% y/y).

Our eyes are on our Monthly Inflation Gauge.

The economy doesn’t wrap itself in cotton wool; it’s a confidence game and the more

Chicken Little comes out to play the greater the

risk the current deceleration becomes a self-

fulfilling downturn.

Our instincts are that a number of these caveats will fail, but it is impossible to know which, or when. China will struggle to stabilise (and hence

commodities too), dairy sector challenges will extend,

and core inflation won’t pick up with the economy

clearly operating below trend (and with structural

forces increasingly relevant as drivers of inflation, in

our view). That leaves us strategically bullish the

front end of the NZ curve and bearish the NZD/USD

and TWI. But we also have to recognise the tactical

side; absent a complete meltdown central banks

require assessment periods after cuts are delivered.

Central banks hardly ever find themselves ahead of

the curve.

In forecast terms, we “manage” this conundrum by pushing against the notion of four cuts up front, but maintain four cuts in total. The number of cuts (four) is not the key

question; but flagging three cuts up front and then

arbitrarily putting another further out (technically

March 2016) is really signalling where we see the risk

profile, and global risks in particular. There are a

number of factors that could see us bring forward the

delayed cut to, say, October this year, or drop it

altogether. As they say in monetary policy circles, it

will be “data dependent”.

On some levels such a strategy appears a little “cute”, and it is certainly true that trying to pick

strategic niceties so far out is a mug’s game when

the entire shebang could be derailed by offshore

developments before year-end. But when push comes to shove, we are far from convinced the RBNZ will be of the mind-set to deliver four in a row absent a lot of further negative news, and

we are here to pick when they will do as opposed to

what they should do – though the latter often

overlaps such as in June when we were very vocal

about the need to cut. Assuming no derailment a

“wait and see” assessment period is going to have to

be taken at some stage, and we’re still picking three

cuts before that.

We could of course nit-pick some elements of the RBNZ’s July statement – one in particular. No mention was made of the current low level of non-tradable inflation, which fell to a 14-year

low in the June quarter. It was just a one-page

statement, so there is obviously not a lot of space to

go into detail. But considering non-tradable inflation

is the part of the CPI basket that the RBNZ arguably

has most control over (versus tradable inflation that

is driven primarily by the NZD and oil prices), you’d

at least expect to see some acknowledgement of the

situation. The outlook for non-tradable inflation is

critical for the monetary policy outlook, and we

believe both cyclical and structural factors explain its

current weakness.

But beyond this, we think the RBNZ’s statement was sensible and struck all the right tones. The

RBNZ made sure it recognised some of the elements

that are still supporting growth (low interest rates,

high net migration and strong construction activity).

It hasn’t been all bad out there, contrary to what

some commentary would have us believe.

From here, the things we will be watching especially closely include:

Our Monthly Inflation Gauge. The RBNZ made

no mention of non-tradable or core inflation

within its statement, but it is clearly relevant. Our

Gauge has proven it tracks domestic inflation

pressures extremely well.

Dairy prices. Yet to show signs of stabilising and

a worry. The same applies to broader commodity

prices.

The NZD; can the wedge between rates and FX be broken? Or more succinctly, will the NZD

follow commodity prices down without rates

leading the charge? We suspect not.

Domestic sentiment. Business and consumer

confidence are well off their peaks (we will get an

update on the former this week), but are

currently far from levels that would suggest the

economy is capitulating.

Of course, the global backdrop fits into all this too. But it’s a much bigger question than the timing

of a fourth cut – events offshore will determine

whether we see an OCR below 2.5%. There could be


ECONOMIC OVERVIEW

some additional volatility as we approach Fed “lift-

off”, but it is China that we are watching most

closely, and recent timely data has us wary. The

Caixin Manufacturing PMI (formerly the HSBC PMI)

fell to just 48.2 in July, the lowest since April 2014,

and this has occurred despite reasonable policy

easing by the PBOC. The credit channel in China is

being clogged by public sector debt and we suspect it

is not performing as well as the official numbers

suggest. Cash-starved zombie banks will slowly

strangle an economy.

The week ahead for domestic data is dominated by the usual month-end releases: building

consents, business confidence, and credit aggregates.

However, it is a speech by Governor Wheeler which will receive most attention. We do not

know the exact topic of his speech other than it will

be on the “economy”. But it doesn’t take a genius to

work out it’ll likely update markets on the RBNZ’s

view of the economy – and by extension interest

rates. We know from the RBNZ last week that “the

growth outlook is now softer than at the time of the

June Statement”; the question is how much weaker,

and where to from here. We suspect the speech will take a glass-half-full approach (which should be NZD positive), but nonetheless fire some shots across the bow of the NZD at the same time. Just because the RBNZ dropped the

“unjustified” and “unsustainable” references doesn’t

mean they don’t want the currency lower; they do.

There should also be plenty of interest in our ANZ Business Outlook survey for July given its leading indicator properties and the fact it has mirrored the recent deterioration in economic prospects. June business confidence fell into

negative territory for the first time since February

2011, with sentiment deteriorating in four of the five

main sectors. Ironically, the sector where sentiment

actually rose slightly in the month was agriculture,

although at a net -29%, it is by far still the most

pessimistic sector with regard to views of the

economy’s prospects going forward.

But what is also important to note from the June figures is that under the hood, things were still tracking along okay. Certainly the survey was

consistent with the economy experiencing a

deceleration in momentum. Firms’ expectations for

their own activity fell to a three-year low of +24,

which is below its historical average. Firms’

profitability, employment and investment intentions

all fell too. Taken together, our ANZBO Composite

index has fallen 14 points over the past 12 months

(see Figure 1). But while these activity indicators

(which are actually the more important ones in terms

of their economic signals than headline confidence)

are consistent with the economy going through a

more challenging period, they suggest deceleration,

not outright economic slowdown. The key from the July figures will be whether or not that message still holds or if economic prospects have deteriorated further.

FIGURE 2. GDP VS ANZBO COMPOSITE

Source: ANZ, Statistics NZ

We expect to see a small gain in nationwide dwelling consent issuance in June, although uncertainty is high. Dwelling consent issuance has

effectively been flat-lining for the past six months, at

an annualised pace of just under 26K. But the

regional composition of that issuance has been

shifting. Auckland has been gradually trending

higher, as has issuance in the likes of the Waikato

and Wellington. However, issuance in Canterbury has

been falling after peaking around the middle of 2014.

It is a clear piece of evidence highlighting the shifting

nature of the earthquake rebuild.

This regional compositional shift is expected to persist. While capacity constraints need to be

considered – our internal anecdotes point to builders

being exceptionally busy in the Auckland region –

there remain strong tailwinds for the Auckland

residential construction sector. Demographic

pressures remain intense, strong existing housing

stock price growth makes building new a more

attractive proposition, and recent interest rate falls

will further support sentiment and demand. But the

key uncertainty is how this is balanced with the

likelihood of ongoing falls in Canterbury issuance. It

is quite possible that these two forces largely offset

one another and nationwide issuance continues to

remain relatively flat.

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ECONOMIC OVERVIEW

FIGURE 3. DWELLING CONSENT TREND

Source: ANZ, Statistics NZ

Finally, credit figures for June should show a further acceleration in overall lending growth. Total private sector credit growth accelerated to 7.0%

on a 3-month annualised basis in May. This, of course,

is still a relatively modest rate by historical standards.

However, it is the fastest growth since late 2008 and

now far exceeds the rate of nominal GDP growth

(which we estimate around 1½% y/y in the June

quarter), meaning the economy is re-leveraging.

FIGURE 4. SECTORAL CREDIT GROWTH

Source: ANZ, RBNZ

All the main sectoral credit components have shown stronger growth over recent times. Household lending is running at a 6.2% pace (again on

a 3-month annualised basis) reflecting the strength in the housing market, Auckland’s in particular. While recently announced LVR restrictions should

eventually see lending growth moderate, it is too soon

to detect any impact of that. We note, however, that

the Government have just announced that from November, they will put in place additional measures to improve the spread of workers, skills and investment outside of Auckland,

including raising bonus points to 30 for skilled

migrants with a job offer outside of Auckland, to

double Entrepreneur Work Visa points to 40 for those

planning to set up businesses in the regions and

setting up a pathway to residents for some long-term

migrants on temporary work visas in the South Island.

For agricultural lending, the 8.2% 3m/3m annualised

pace was the strongest since mid-2009 and no doubt

relates to the cash flow strains evident in the dairy sector. These pressures looks set to intensify,

with our internal anecdotes showing more requests for

funding, given working capital pressures.

The drivers behind the acceleration in business sector lending are a little more debatable. Those

preferring to look at the backdrop with a “glass half-

empty” persuasion could argue this reflects broadening

cash flow pressures in other sectors (and we admit

there have been a few more internal anecdotes

regarding difficulty with collecting accounts

receivable). However, it is also possible that it just

reflects an ongoing solid desire for investment. While

firms’ investment intentions have fallen, they do

remain at reasonable levels and so this higher lending

growth may just reflect that. Time will tell.

Offshore this week, there will certainly be some focus on the US, with the FOMC meeting and Q2 GDP data released. It is unlikely the Fed will deliver

any shift in policy at this meeting. However, that day

is clearly approaching, so any tweaks in the language

or tone will be watched closely by the market. We still

believe “lift-off” is most likely to occur in September.

But given the data-dependency of the Fed, there

should also likely be plenty of attention on the

preliminary Q2 GDP data released the following day.

The market is expected a modest rebound in activity

after a weather-induced contraction in Q1.

LOCAL DATA International Travel & Migration – Jun. A net

inflow of 4,800 long-term migrants was experienced,

with the annual net inflow rising to another all-time

high. Seasonally adjusted visitor arrivals fell 0.2%

(+6.9% y/y).

Credit Card Billings – Jun. Overall billings rose 0.3%

m/m sa (+6.5% y/y). Domestic card billings fell 0.1%

m/m (+5.2%), while overseas billings rose 3.2% m/m

(+16.9% y/y).

RBNZ OCR Review. The OCR was lowered by 25bps

to 3.0% as expected. Given a softer economic outlook

and low inflation, the RBNZ acknowledged that “some

further easing seems likely”.

Overseas Merchandise Trade – Jun. An unadjusted

trade deficit of $60m was recorded, with the

seasonally adjusted deficit widening to $374m – the

largest since December.

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SUMMARY While the RBNZ maintains an easing bias, their rhetoric

doesn’t exactly scream of being in a hurry to get the

OCR back to 2.50%. Amid market talk of 50bp cuts

and with positioning long, some retracement in market

pricing is likely in coming weeks. This, and strong

ongoing demand for yield at the back end of the curve

should contribute to curve flattening. Despite the Fed

moving closer to lift-off, gradualism, global policy

support, and a negatively skewed risk profile should

cap long-term global yields. Outright yields and

spreads, for local yields have narrowed considerably of

late, but there is scope for local yields to move lower

still.

THEMES By delivering a 25bp cut and reiterating “some

further easing seems likely”, the RBNZ did not

move to the extent hoped by parts of the market

with some steepening pressure unwound.

We expect the OCR to eventually fall to 2.5%, but

we doubt we’ll see four cuts in a row; a period(s) of

assessment beckons. This could see some short-

term receive pressure unwound.

Despite this, current pricing of 2016 rate hikes is

premature and the extent of any OCR hikes will

likely be more modest than the market expects,

which should assist the flattening in the curve.

The Fed is expected to remain on hold on Thursday

while flagging the potential of a September start,

but retain its gradualist and data dependent

stance. This, and a negatively skewed risk profile

are expected to cap upward pressure on global

yields and keep rates historically low.

Local long-end yields have fallen considerably and

spreads to global counterparts have narrowed.

Outright yields remain high in a global comparison,

bond demand remains strong and markets are re-

thinking views on long-term anchors like estimates

of the neutral OCR.

PREFERRED STRATEGIES – INVESTORS

KEY VIEWS – FOR INVESTORS GAUGE DIRECTION COMMENT

Duration Strategically

bullish

FOMC gradualism, China caution

+ high NZ bond yields = bullish.

2s10s Curve Flattening pressure

OCR cuts almost fully priced in,

but less aggressive RBNZ should unwind curve steepening.

Geographic

10yr spread Neutral

OCR outlook argues for further

narrowing despite levels.

Swap

spreads Neutral/wider

Bond demand still decent, long-

end swap market very quiet.

WILL THE RBNZ MEET THE MARKET? The RBNZ cut as expected last week though with tones

not as dovish as the market had generally expected

(amid talk of a 50bps cut), triggering a mild sell off in

kiwi rates. When combined with a fall in longer-term

rates we saw the obvious steepening pressure unwind

and the curve flatten.

FIGURE 1: NZ SWAP CURVE

Source: ANZ, Bloomberg

Regarding event risk, we note that RBNZ Governor Wheeler is speaking on Wednesday. At the

margin we expect more positive nuances towards the

economy, with the obvious implication being food for

thought on how willing the RBNZ will be to get the

OCR down quickly. While we believe a September cut

is odds on, we are mindful that the short end is prone

to some near term recalibration as the market shrugs

off talk of 50bps cuts and interprets the meaning of

“at this point, some further easing seems likely”.

While clearly bullish, market expectations are more bullish and positioning remains an issue.

Any hint of caution by the Governor is likely to lead

to some moderation in pricing.

FED LIKELY TO STICK TO SCRIPT Bond yields have eased in Europe and the US, with the bellwether 10-year US Treasury bond yield at its lowest level in two weeks. This is

despite the improving tone evident in US data, which

should persist this week with a solid Q2 GDP report

expected. This week’s FOMC policy meeting should be uneventful from a policy perspective,

with the Fed to reiterate the data dependence and

gradualism of future moves. If hiring remains firm in

the next couple of months, this should be sufficient

grounds for the Fed to proceed with hiking in

September. We expect that global yields will trend

higher as the process of interest rate normalisation

gets underway but that this will be a slow process.

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FIGURE 2: 10 YEAR GOVERNMENT BOND YIELDS


Local long-end yields have fallen considerably and spreads have narrowed. The search for yield is

alive and well, with yields on all NZGS except the

2027s closing at their respective record lows on Friday.

At face value, such developments suggest that bonds

are “rich” and therefore prone to a correction,

particularly as 10 years spreads to the US and Australia

have also compressed sharply over the past year.

However, when we consider the degree of offshore

participation in the market, with the RBNZ still in

easing mode as the Fed inches closer to hiking, one of

the few credible scenarios involving higher local yields

is the one involving higher US yields. Yet we typically

see NZ/US spreads narrow as US yields rise (Figure 3),

highlighting the defensive value of NZGS.

FIGURE 3: 10 YEAR NZGS YIELD CHANGES VS 10 YEAR US TREASURY YIELD CHANGES SINCE 2000

Source: ANZ estimates, Bloomberg

There was certainly plenty of demand for bonds when the DMO tendered $200m of NZGS 2020s last week. Despite being offered at a record low, the tender attracted over $1bn of bids, underscoring the idea that NZGS remain cheap by global comparison. With offshore ownership of

the New Zealand government bond market at a record

high, offshore demand for New Zealand assets

remains a key NZD support.

PREFERRED STRATEGIES – BORROWERS Our preference is to watch and wait. The RBNZ have

cut the OCR by 50bps and are on an easing bias.

Developments are moving quickly. Rates are

historically low, but locking into hedges now would

prevent borrowers from taking advantage of further

falls in interest rates. The recent steepening in the

curve also makes hedging a progressively less

attractive proposition for the majority of borrowers.

KEY VIEWS – FOR BORROWERS

GAUGE VIEW COMMENT

Hedge ratio Majority

hedged

Historic hedges adequate. No

immediate reason to add cover.

Value Cheap Cheap but getting cheaper.

Uncertainty Elevated The key reason for caution.

MARKET EXPECTATIONS

A 25bp cut is fully priced in for September, with 40bps

of cuts priced in by the end of the year, and with the

OCR set to trough at 2.56% by early next year. This is

close to our OCR view, although we expect the RBNZ to

pause from September, before moving in March next

year. There is limited scope for the market to test

lower in the absence of a global meltdown, which while

possible, is not our core view.

FIGURE 4: ANZ OCR FORECAST AGAINST MARKET-IMPLIED FORWARD 3MTH BILL RATES AND RBNZ 90 DAY BILL PROJECTIONS


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R² = 0.45

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ANZ's OCR Forecasts

Market implied forward 3mth bill rates

RBNZ 90 day bill projections (June 2015 MPS)


CURRENCY STRATEGY

SUMMARY The trend for NZD remains lower and we agree with

the RBNZ description of depreciation as being

“necessary”. US events this week should support USD,

but markets look very well positioned for such a result,

suggesting some consolidation for NZD/USD over

coming weeks is likely despite our 6 month trend view

remaining down. The downside risks for kiwi remain in

global commodity prices, with recent AUD/USD price

action a warning against expecting too much stability.

Weak AUD/USD price action is expected to keep

supporting the NZD/AUD.

TABLE 1: KEY VIEWS CROSS WEEK MONTH YEAR

NZD/USD ↔ Downside risks remain

USD to strengthen

NZD/AUD ↔/↑ Close to fair

value Topside capped

NZD/EUR ↔ EUR remains weak

EUR remains weak

NZD/GBP ↔/↑ GBP in demand GBP resurgence

NZD/JPY ↔ Official support for JPY

Yen weakness

THEMES AND RISKS Commodity prices have declined

precipitously of late, with dairy being the

prominent local example. This is keeping pressure

on all commodity currencies.

We expect the USD to remain well supported

as US data releases dominate the calendar this

week. The FOMC and Q2 GDP key.

After last week’s change of language on the NZD –

it is no longer “unjustified” and “unsustainable” –

markets will be sensitive to Governor Wheeler’s comments. We expect the message

of future depreciation to be reinforced, but given

short positioning there are upside risks for NZD.

TABLE 2: KEY UPCOMING EVENT RISK

EVENT WHEN (NZDT)

LIKELY IMPACT

EUR German IFO Mon 20:00 NZD/EUR ↑

GBP CBI Trends Mon 22:00 NZD/GBP ↑

USD Durable goods Tue 00:30 NZD/USD ↓

GBP Q2 GDP Tue 20:30 NZD/GBP ↓ USD Consumer confidence Wed 02:00 NZD/AUD ↑

NZD Governor Wheeler Wed 09:00 NZD ↑

GBP Consumer credit Wed 20:30 NZD/GBP ↓

USD FOMC Thu 06:00 NZD/GBP ↓

NZD Building permits Thu 10:45 NZD ↔

AUD RBA Stevens Thu 12:30 NZD/AUD ↑

USD Q2 GDP Fri 00:30 NZD/USD ↓

JPY CPI Fri 11:30 NZD/JPY ↑

NZD ANZ Business conf. Fri 13:00 N/A

AUD Private credit Fri 13:30 NZD/AUD ↑

USD Chicago PM Sat 01:45 NZD/USD ↓

CNY China PMIs Sat 13:00 NZD ↓

EXPORTERS’ STRATEGY

NZD/USD exporters may wish to consider calls instead

of buying spot. Exporters to EUR and JPY may find

current levels attractive given the summer lull.

IMPORTERS’ STRATEGY Importers should use any bounces to extend hedging.

DATA PULSE

The RBNZ tone was not as pessimistic as markets had been pricing, supporting the NZD last

week. Other data helped that case with net migration

and the export component of trade remaining solid.

However, global commodity price declines weighed on NZD. Commodity prices are under

downward pressure, keeping commodity currencies

weak. Yet Australian domestic data did little to shift the AUD, with Q2 CPI neither strong nor weak

enough to substantively impact RBA deliberations, and

RBA Stevens seeing no hurry to act on an easing bias. General US housing data strength and a 42 year low in jobless claims supported USD. Sterling lost its gloss last week. Despite the BoE

minutes continuing with the rhetoric regarding the

need for rate hikes, data weakness in the form of

negative retail sales weighed on GBP. We expect GBP

to weaken as data softens, despite being optimistic on

the longer-term outlook.

Europe moves on from Greece, as bailout talks

commence. Weak EU Markit PMIs showed that the ECB

has to support activity, a process keeping EUR weak.

Chinese fears re-emerged as the Caixin China

Manufacturing PMI unexpectedly declined. Despite

stability in equities and other data releases, markets

remain nervous over the China question.

TABLE 3: NZD VS AUD: MONTHLY GAUGES GAUGE GUIDE COMMENT

Fair value ↔ Closer to long-run averages.

Yield ↔ NZD yield changes fully priced.

Commodities ↓ Milk falls outpacing iron ore.

Data ↓ AU data somewhat stabilised.

Techs ↔ Established a 0.87-91 range.

Sentiment ↑ Peak NZD negative sentiment?

Other ↑ AUD higher beta to China.

On balance ↔ Consolidation. TABLE 4: NZD VS USD: MONTHLY GAUGES

GAUGE GUIDE COMMENT Fair value ↔ Closer to fair value.

Yield ↔ Yield advantage being cut.

Commodities ↓ Dairy still concerning.

Risk aversion ↔ Global fears easing.

Data ↓ NZ data rolling over.

Techs ↑ NZD overstretched. Other ↑ FOMC signals slow normalisation.

On balance ↔/↓ Consolidation is in order, but risks are lower.


CURRENCY STRATEGY

TECHNICAL OUTLOOK FIGURE 1. NZD/USD DAILY CANDLES WITH RSI & MA

After blowing through multiple support levels from 0.70 down, NZD is again attempting to consolidate. Topside resistance at 0.67 to 0.68 looks

very strong, with resistances also strong in the mid

0.66’s. Support starts at 0.6480 and builds to its peak

at 0.6430. The technical picture remains one of

declines, but declines that are due for a consolidation.

FIGURE 2. NZD/AUD DAILY CANDLES WITH RSI & MA

The technical picture of NZD/AUD holds a warning. While the picture is one of consolidation

between 0.87 and 0.91, the topside looks under

threat, with RSI mid-range despite testing the top of

the range. If the 0.91/92 pivot goes then technically

we are open to 0.94.

TABLE 5: KEY TECHNICAL ZONES CROSS SUPPORT RESISTANCE

NZD/USD 0.6460 – 0.6480

0.6200 – 0.6250

0.6700 – 0.6750

0.6940 – 0.6960

NZD/AUD 0.8700 – 0.8750

0.8600 – 0.8650

0.9040 – 0.9100

0.9180 – 0.9240

NZD/EUR 0.5900 – 0.5950 0.6350 – 0.6400

NZD/GBP 0.4250 – 0.4300 0.4680 – 0.4720

NZD/JPY 80.00 – 80.50 83.50 – 87.50

POSITIONING USD positioning increased to a six week high, with

short EUR and JPY positioning increasing the most.

NZD positions were trimmed into the RBNZ, but AUD

shorts were increased.

GLOBAL VIEWS Global commodity prices are under significant pressure

at present, with oil, industrial metals (such as copper),

and soft commodities (corn, wheat sugar) all declining

significantly last week. This has kept commodity

currencies such as NZD and AUD under pressure – AUD

hit a new 6 year low last week. Risks to commodity

currencies (including the NZD) therefore remain

skewed to the downside.

The USD remains in a broad uptrend and the FOMC

(Thursday) is expected to hold a steady course. We

expect the USD to find support from a status quo

“every meeting is live” message, but the real driver is

Q2 GDP, which we expect to show enough growth to

keep USD in demand.

Finally, global activity remains a concern, with a weak

Chinese advance PMI and declining European PMIs last

week. This dynamic should keep pressure on NZD via

elevated risk premia.

FORWARDS: CARRY AND BASIS FIGURE 4. NZD/USD SHORT BASIS CURVE

The RBNZ cut by 25bps as expected, allowing O/N

cash to return to OCR levels and flatten the basis

curve. There is a mild basis pickup for rolling longer

than 3m, but given the pace of recent developments

we think the flexibility to respond to developments

that shorter rolls offer is more attractive, and thus

would keep rolls shorter in duration.

FIGURE 5. RELATIVE ATTRACTION OF THE FWD CURVE

Source: ANZ, Bloomberg, Reuters

-5

0

5

10

15

20

O/N 2m 4m 6m 8m 10m 12m

Basis

MonthsBasis Last Week

0.85

0.90

0.95

1.00

1.05

1.10

O/N 1m 2m 3m 4m 5m 6m 7m 8m 9m 10m 11m 12m

Rela

tive V

alu

e

MonthsRelative Value Last Week


DATA EVENT CALENDAR

DATE COUNTRY DATA/EVENT MKT. LAST NZ TIME

27-Jul GE Import Price Index MoM - Jun -0.3% -0.2% 18:00

GE Import Price Index YoY - Jun -1.3% -0.8% 18:00

GE IFO Business Climate - Jul 107.2 107.4 20:00

GE IFO Current Assessment - Jul 112.9 113.1 20:00

GE IFO Expectations - Jul 101.8 102.0 20:00

EC M3 Money Supply YoY - Jun 5.1% 5.0% 20:00

EC M3 3-month average - Jun 5.1% 5.0% 20:00

UK CBI Trends Total Orders - Jul -6 -7 22:00

UK CBI Trends Selling Prices - Jul -8 -7 22:00

UK CBI Business Optimism - Jul 1 3 22:00

28-Jul US Durable Goods Orders - Jun 3.2% -2.2% 00:30

US Durables Ex Transportation - Jun 0.5% 0.0% 00:30

US Cap Goods Orders Nondef Ex Air - Jun 0.5% -0.4% 00:30

US Cap Goods Ship Nondef Ex Air - Jun 0.6% -0.1% 00:30

US Dallas Fed Manf. Activity - Jul -3 -7 02:30

AU ANZ-RM Consumer Confidence Index - 26-Jul -- 111.8 11:30

UK GDP QoQ - Q2 A 0.7% 0.4% 20:30

UK GDP YoY - Q2 A 2.6% 2.9% 20:30

UK Index of Services MoM - May 0.3% 0.2% 20:30

UK Index of Services 3M/3M - May 0.5% 0.5% 20:30

CH Leading Index - Jun -- 98.97 28-31 Jul

UK Nationwide House PX MoM - Jul 0.4% -0.2% 28 Jul - 3 Aug

UK Nationwide House Px NSA YoY - Jul 3.5% 3.3% 28 Jul - 3 Aug

29-Jul US S&P/CS 20 City MoM SA - May 0.3% 0.3% 01:00

US S&P/CS Composite-20 YoY - May 5.60% 4.91% 01:00

US Markit Composite PMI - Jul P -- 54.6 01:45

US Markit Services PMI - Jul P 55.0 54.8 01:45

US Consumer Confidence Index - Jul 100.0 101.4 02:00

US Richmond Fed Manufact. Index - Jul 8 6 02:00

JN Retail Trade YoY - Jun 1.0% 3.0% 11:50

JN Retail Sales MoM - Jun -0.9% 1.7% 11:50

GE GfK Consumer Confidence - Aug 10.1 10.1 18:00

UK Net Consumer Credit - Jun £1.1B £1.0B 20:30

UK Net Lending Sec. on Dwellings - Jun £2.0B £2.1B 20:30

UK Mortgage Approvals - Jun 66.0K 64.4K 20:30

UK Money Supply M4 MoM - Jun -- 0.5% 20:30

UK M4 Money Supply YoY - Jun -- 0.7% 20:30

UK M4 Ex IOFCs 3M Annualised - Jun -- 4.5% 20:30

UK CBI Reported Sales - Jul 29 29 22:00

US MBA Mortgage Applications - 24-Jul -- 0.1% 23:00

30-Jul US Pending Home Sales MoM - Jun 1.0% 0.9% 02:00

US Pending Home Sales NSA YoY - Jun 12.0% 8.3% 02:00

US FOMC Rate Decision - Jul 0.25% 0.25% 06:00

NZ Building Permits MoM - Jun -- 0.0% 10:45

JN Industrial Production MoM - Jun P 0.3% -2.1% 11:50

JN Industrial Production YoY - Jun P 1.3% -3.9% 11:50

AU Import price index QoQ - Q2 1.5% -0.2% 13:30

AU Export price index QoQ - Q2 -4.0% -0.8% 13:30

Continued on following page


DATA EVENT CALENDAR

Key: AU: Australia, EC: Eurozone, GE: Germany, JN: Japan, NZ: New Zealand, UK: United Kingdom, US: United States, CH: China. Source: Dow Jones, Reuters, Bloomberg, ANZ Bank New Zealand Limited. All $ values in local currency. Note: All surveys are preliminary and subject to change

DATE COUNTRY DATA/EVENT MKT. LAST NZ TIME

30-Jul AU Building Approvals MoM - Jun -1.0% 2.4% 13:30

AU Building Approvals YoY - Jun 19.5% 17.6% 13:30

GE Unemployment Change (000's) - Jul -5K -1K 19:55

GE Unemployment Claims Rate SA - Jul 6.4% 6.4% 19:55

EC Economic Confidence - Jul 103.2 103.5 21:00

EC Business Climate Indicator - Jul 0.19 0.14 21:00

EC Industrial Confidence - Jul -3.4 -3.4 21:00

EC Services Confidence - Jul 8.0 7.9 21:00

EC Consumer Confidence - Jul F -7.1 -7.1 21:00

31-Jul GE CPI MoM - Jul P 0.2% -0.1% 00:00

GE CPI YoY - Jul P 0.3% 0.3% 00:00

GE CPI EU Harmonized MoM - Jul P 0.3% -0.2% 00:00

GE CPI EU Harmonized YoY - Jul P 0.1% 0.1% 00:00

US GDP Annualized QoQ - Q2 A 2.5% -0.2% 00:30

US Personal Consumption - Q2 A 2.7% 2.1% 00:30

US GDP Price Index - Q2 A 1.5% 0.0% 00:30

US Core PCE QoQ - Q2 A 1.6% 0.8% 00:30

US Initial Jobless Claims - 25-Jul 270K 255K 00:30

US Continuing Claims - 18-Jul 2211K 2207K 00:30

UK GfK Consumer Confidence - Jul 5 7 11:05

JN Natl CPI YoY - Jun 0.3% 0.5% 11:30

JN Natl CPI Ex Fresh Food YoY - Jun 0.0% 0.1% 11:30

JN Natl CPI Ex Food, Energy YoY - Jun 0.4% 0.4% 11:30

JN Tokyo CPI YoY - Jul 0.2% 0.3% 11:30

JN Tokyo CPI Ex-Fresh Food YoY - Jul 0.0% 0.1% 11:30

JN Tokyo CPI Ex Food, Energy YoY - Jul 0.2% 0.2% 11:30

NZ ANZ Activity Outlook - Jul -- 23.6 13:00

NZ ANZ Business Confidence - Jul -- -2.3 13:00

AU PPI YoY - Q2 -- 0.7% 13:30

AU PPI QoQ - Q2 -- 0.5% 13:30

AU Private Sector Credit MoM - Jun 0.5% 0.5% 13:30

AU Private Sector Credit YoY - Jun 6.0% 6.2% 13:30

NZ Money Supply M3 YoY - Jun -- 8.1% 15:00

GE Retail Sales MoM - Jun 0.3% 0.2% 18:00

GE Retail Sales YoY - Jun 4.0% -0.4% 18:00

EC Unemployment Rate - Jun 11.0% 11.1% 21:00

EC CPI Estimate YoY - Jul 0.2% 0.2% 21:00

EC CPI Core YoY - Jul A 0.8% 0.8% 21:00

1-Aug US Employment Cost Index - Q2 0.6% 0.7% 00:30

US ISM Milwaukee - Jul 50.0 46.55 01:00

US Chicago Purchasing Manager - Jul 50.9 49.4 01:45

US U. of Mich. Sentiment - Jul F 94.0 93.3 02:00

CH Manufacturing PMI - Jul 50.2 50.2 13:00

CH Non-manufacturing PMI - Jul -- 53.8 13:00


LOCAL DATA WATCH

Economic momentum is slowing and downside risks are apparent. At a time of subdued core inflation, the RBNZ is

taking action by cutting the OCR. We expect the RBNZ to return the OCR to 2.5%.

DATE DATA/EVENT ECONOMIC SIGNAL COMMENT

Thu 30 Jul

(10:45am) Building Consents – Jun Capped

Nationwide dwelling consent issuance is flat-lining. However,

the composition is shifting. Auckland is trending higher;

Canterbury is falling.

Fri 31 Jul

(1:00pm)

ANZ Business Outlook –

Jul -- --

Fri 31 Jul

(3:00pm)

RBNZ Credit Aggregates –

Jun Firming

Overall credit growth is accelerating. While this in part reflects

stronger housing credit growth, it is also most likely due to cash

flow pressures in the agricultural space.

Tue 4 Aug

(12:00pm) QV House Prices – Jul Two-tone

REINZ data suggests circa 10% annual nationwide house price

inflation, with a stark Auckland vs. Rest of NZ divide.

Tue 4 Aug

(1:00pm)

ANZ Commodity Price

Index – Jul -- --

Wed 5 Aug

(10:45am)

Labour Market Statistics –

Q2 Softening

With demand slowing, but solid supply growth, the

unemployment rate is expected to hold at 5.8% (although there

is upside risk). Wage growth should remain low.

7 Aug Fonterra Board Meeting Another downgrade

We now forecast a $3.75-$4.00/kg MS milk price. Fonterra is

unlikely to downgrade to that extent yet, but it will lower its

current $5.25/kg MS forecast.

10-14 Aug REINZ Housing Statistics

– Jul On the look-out

There has been little sign yet of any early impact of recent

RBNZ and government policy changes, but we will be watching

closely.

Tue 11 Aug

(10:00am) ANZ Truckometer -- --

Tue 11 Aug

(10:45am)

Electronic Card

Transactions – Jul Softer trend

With household income growth slowing, petrol prices higher and

consumer confidence retreating, we see the underlying pace of

spending growth continuing to slow.

Tue 11 Aug

(1:00pm)

ANZ Monthly Inflation

Gauge -- --

Thu 13 Aug

(10:30am)

Business NZ

Manufacturing PMI – Jul Reversal

Contrary to the signal from our Business Outlook, the headline

index rose in June. We wonder if that will be sustained,

notwithstanding NZD support.

Thu 13 Aug

(10:45am) Food Price Index – Jul Small increase

Lead by a seasonal increase in fruit and vegetable prices, food

prices should be stronger in the month.

Fri 14 Aug

(10:45am) Retail Trade Survey – Q2 Pull-back

After a strong lift in sales volumes in Q1, a much more benign

outturn is possible. A negative result for core volumes cannot

be ruled out.

Mon 17 Aug

(10:30am)

Business NZ Services PSI

– Jul Off highs?

The services sector has been outperforming. But it typically lags

the economic cycle. Is it time to see some moderation?

Wed 19 Aug

(10:45am) PPI – Q2 Weak

Both input and output price indices should fall courtesy of

commodity price weakness and lower wholesale electricity

prices.

Thu 20 Aug

(10:00am) ANZ Job Ads – Jul -- --

Thu 20 Aug

(1:00pm)

ANZ Roy Morgan

Consumer Confidence –

Aug

-- --

Fri 21 Aug

(10:45am)

International Travel & Net

Migration – Jul Topping out

The pace of monthly net inflows has stabilised between 4.8K

and 5K. The annual net inflow will peak shortly, although there

is little sign of slowing just yet.

On balance Data watch The economy is running at a sub-trend pace, and risks are skewed to the downside. Inflation is subdued.


KEY FORECASTS AND RATES

Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17

GDP (% qoq) 0.5 0.6 0.6 0.7 0.7 0.7 0.7 0.6 0.6 0.6

GDP (% yoy) 2.4 2.0 2.0 2.5 2.7 2.7 2.7 2.6 2.6 2.5

CPI (% qoq) 0.4 0.5 0.2 0.6 0.4 0.6 0.2 0.5 0.6 0.7

CPI (% yoy) 0.3 0.4 0.8 1.7 1.7 1.8 1.8 1.7 1.9 2.0

Employment

(% qoq) 0.5 0.4 0.4 0.3 0.3 0.3 0.3 0.3 0.3 0.3

Employment

(% yoy) 3.4 2.9 2.1 1.7 1.5 1.3 1.3 1.2 1.2 1.2

Unemployment Rate

(% sa) 5.8 5.8 5.8 5.7 5.7 5.6 5.6 5.5 5.5 5.4

Current Account

(% GDP) -3.9 -4.1 -4.6 -5.4 -5.8 -6.0 -5.9 -5.8 -5.7 -5.7

Terms of Trade

(% qoq) -5.7 -5.9 -7.4 -3.2 0.7 1.5 2.1 2.0 1.7 1.5

Terms of Trade

(% yoy) -10.8 -12.2 -16.8 -20.6 -15.1 -8.4 1.0 6.4 7.5 7.5

Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15

Retail ECT (% mom) 1.0 0.1 0.0 0.0 1.0 0.7 -0.6 1.3 0.5 --

Retail ECT (% yoy) 5.2 3.2 3.7 4.5 4.0 3.7 3.9 3.2 5.0 --

Credit Card Billings

(% mom) 1.4 0.4 -0.5 2.0 0.0 0.7 -0.3 1.8 0.3 --

Credit Card Billings

(% yoy) 6.8 5.2 4.6 6.2 5.8 5.3 7.3 7.2 6.5 --

Car Registrations

(% mom) -1.7 0.3 2.1 -0.7 -0.3 2.5 -1.5 -0.2 5.3 --

Car Registrations

(% yoy) 21.3 16.5 21.0 17.1 12.1 11.8 11.2 6.8 11.2 --

Building Consents

(% mom) 12.6 12.1 -6.5 -2.5 -5.6 9.9 -0.9 0.0 -- --

Building Consents

(% yoy) 13.0 16.1 2.6 7.8 -0.2 7.3 3.1 6.5 -- --

REINZ House Price

Index (% yoy) 2.6 4.7 5.7 8.5 7.1 8.5 9.3 11.8 14.8 --

Household Lending

Growth (% mom) 0.4 0.4 0.5 0.5 0.5 0.5 0.5 0.7 -- --

Household Lending

Growth (% yoy) 4.8 4.7 4.7 4.8 4.9 5.0 5.2 5.5 -- --

ANZ Roy Morgan

Consumer Conf. 123.4 121.8 126.5 128.9 124.0 124.6 128.8 123.9 119.9 113.9

ANZ Business

Confidence 26.5 31.5 30.4 .. 34.4 35.8 30.2 15.7 -2.3 --

ANZ Own Activity

Outlook 37.8 41.7 37.3 .. 40.9 42.2 41.3 32.6 23.6 --

Trade Balance ($m) -892 -283 -200 52 84 661 184 371 -60 --

Trade Bal ($m ann) -56 -492 -1183 -1416 -2129 -2372 -2655 -2549 -2848 --

ANZ World Commodity

Price Index (% mom) -0.9 -1.4 -4.4 -0.3 4.2 4.6 -7.4 -4.9 -3.1 --

ANZ World Comm.

Price Index (% yoy) -11.5 -12.5 -17.2 -18.4 -15.8 -11.9 -15.3 -18.0 -19.7 --

Net Migration (sa) 5220 4990 4090 5470 4840 5010 4770 5080 4800 --

Net Migration (ann) 47684 49836 50922 53797 55121 56275 56813 57822 58259 --

ANZ Heavy Traffic

Index (% mom) 0.9 -2.9 3.3 -0.1 -0.5 -0.4 -0.5 -1.0 1.6 --

ANZ Light Traffic

Index (% mom) 0.3 -1.6 2.1 0.7 0.7 -1.0 0.1 -0.6 0.9 --

Figures in bold are forecasts. mom: Month-on-Month qoq: Quarter-on-Quarter yoy: Year-on-Year


KEY FORECASTS AND RATES

ACTUAL FORECAST (END MONTH)

FX RATES May-15 Jun-15 Today Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17

NZD/USD 0.711 0.677 0.658 0.63 0.61 0.59 0.59 0.59 0.59 0.59

NZD/AUD 0.930 0.878 0.904 0.86 0.85 0.83 0.84 0.84 0.84 0.84

NZD/EUR 0.647 0.607 0.599 0.60 0.62 0.58 0.55 0.53 0.53 0.53

NZD/JPY 88.23 82.87 81.42 76.2 74.4 72.6 73.2 73.8 73.8 73.8

NZD/GBP 0.465 0.431 0.424 0.41 0.41 0.39 0.38 0.38 0.38 0.38

NZ$ TWI 75.7 71.4 70.2 68.4 67.7 65.1 64.4 63.7 63.7 63.7

INTEREST RATES May-15 Jun-15 Today Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17

NZ OCR 3.50 3.25 3.00 2.75 2.75 2.50 2.50 2.50 2.50 2.50

NZ 90 day bill 3.47 3.26 3.05 2.90 2.90 2.60 2.60 2.70 2.70 2.70

NZ 10-yr bond 3.63 3.63 3.31 3.60 3.80 3.80 3.90 3.90 3.90 3.90

US Fed funds 0.25 0.25 0.25 0.50 0.75 1.00 1.25 1.50 1.75 1.75

US 3-mth 0.28 0.28 0.29 0.60 0.85 1.10 1.35 1.60 1.85 1.85

AU Cash Rate 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00

AU 3-mth 2.15 2.15 2.14 2.20 2.20 2.20 2.20 2.20 2.20 2.20

24 Jun 20 Jul 21 Jul 22 Jul 23 Jul 24 Jul

Official Cash Rate 3.25 3.25 3.25 3.25 3.25 3.00

90 day bank bill 3.25 3.06 3.07 3.06 3.06 3.05

NZGB 12/17 2.90 2.60 2.61 2.60 2.61 2.58

NZGB 03/19 2.99 2.67 2.67 2.66 2.66 2.61

NZGB 04/23 3.39 3.07 3.07 3.06 3.04 2.96

NZGB 04/27 3.73 3.45 3.45 3.44 3.41 3.31

2 year swap 3.10 2.84 2.86 2.84 2.88 2.86

5 year swap 3.32 3.07 3.09 3.07 3.08 3.05

RBNZ TWI 71.7 69.68 70.25 70.15 70.51 70.28

NZD/USD 0.6867 0.65 0.66 0.66 0.66 0.66

NZD/AUD 0.8880 0.89 0.90 0.89 0.90 0.90

NZD/JPY 85.09 81.28 82.05 81.82 82.25 81.64

NZD/GBP 0.4362 0.42 0.42 0.42 0.42 0.42

NZD/EUR 0.6139 0.60 0.61 0.60 0.61 0.60

AUD/USD 0.7733 0.74 0.74 0.74 0.74 0.73

EUR/USD 1.1185 1.08 1.08 1.09 1.09 1.10

USD/JPY 123.91 124.16 124.37 123.78 124.05 123.88

GBP/USD 1.5744 1.56 1.56 1.56 1.56 1.55

Oil (US$/bbl) 61.05 50.88 50.11 50.59 49.27 48.11

Gold (US$/oz) 1177.81 1106.47 1104.00 1093.95 1099.25 1083.60

Electricity (Haywards) 9.37 6.44 7.24 5.65 5.82 5.33

Baltic Dry Freight Index 829 1067 1113 1118 1102 1086

Milk futures (USD) 61 50 51 50 49 49


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1. Disclaimer for all jurisdictions, where content is authored by ANZ Research: Except if otherwise specified in section 2 below, this publication is issued and distributed in your country/region by Australia and New Zealand Banking Group Limited (ABN 11 005 357 522) (“ANZ”), on the basis that it is only for the information of the specified recipient or permitted user of the relevant website (collectively, “recipient”). This publication may not be reproduced, distributed or published by any recipient for any purpose. It is general information and has been prepared without taking into account the objectives, financial situation or needs of any person. Nothing in this publication is intended to be an offer to sell, or a solicitation of an offer to buy, any product, instrument or investment, to effect any transaction or to conclude any legal act of any kind. If, despite the foregoing, any services or products referred to in this publication are deemed to be offered in the jurisdiction in which this publication is received or accessed, no such service or product is intended for nor available to persons resident in that jurisdiction if it would be contradictory to local law or regulation. Such local laws, regulations and other limitations always apply with non-exclusive jurisdiction of local courts. Certain financial products may be subject to mandatory clearing, regulatory reporting and/or other related obligations. These obligations may vary by jurisdiction and be subject to frequent amendment. Before making an investment decision, recipients should seek independent financial, legal, tax and other relevant advice having regard to their particular circumstances. The views and recommendations expressed in this publication are the author’s. They are based on information known by the author and on sources which the author believes to be reliable, but may involve material elements of subjective judgement and analysis. Unless specifically stated otherwise: they are current on the date of this publication and are subject to change without notice; and, all price information is indicative only. Any of the views and recommendations which comprise estimates, forecasts or other projections, are subject to significant uncertainties and contingencies that cannot reasonably be anticipated. On this basis, such views and recommendations may not always be achieved or prove to be correct. Indications of past performance in this publication will not necessarily be repeated in the future. No representation is being made that any investment will or is likely to achieve profits or losses similar to those achieved in the past, or that significant losses will be avoided. Additionally, this publication may contain ‘forward looking statements’. Actual events or results or actual performance may differ materially from those reflected or contemplated in such forward looking statements. All investments entail a risk and may result in both profits and losses. Foreign currency rates of exchange may adversely affect the value, price or income of any products or services described in this publication. The products and services described in this publication are not suitable for all investors, and transacting in these products or services may be considered risky. ANZ and its related bodies corporate and affiliates, and the officers, employees, contractors and agents of each of them (including the author) (“Affiliates”), do not make any representation as to the accuracy, completeness or currency of the views or recommendations expressed in this publication. Neither ANZ nor its Affiliates accept any responsibility to inform you of any matter that subsequently comes to their notice, which may affect the accuracy, completeness or currency of the information in this publication. Except as required by law, and only to the extent so required: neither ANZ nor its Affiliates warrant or guarantee the performance of any of the products or services described in this publication or any return on any associated investment; and, ANZ and its Affiliates expressly disclaim any responsibility and shall not be liable for any loss, damage, claim, liability, proceedings, cost or expense (“Liability”) arising directly or indirectly and whether in tort (including negligence), contract, equity or otherwise out of or in connection with this publication. If this publication has been distributed by electronic transmission, such as e-mail, then such transmission cannot be guaranteed to be secure or error-free as information could be intercepted, corrupted, lost, destroyed, arrive late or incomplete, or contain viruses. ANZ and its Affiliates do not accept any Liability as a result of electronic transmission of this publication. ANZ and its Affiliates may have an interest in the subject matter of this publication as follows: They may receive fees from customers for dealing in the products or services described in this publication, and their staff and introducers

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IMPORTANT NOTICE

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This document has been prepared by ANZ Bank New Zealand Limited, Level 7, 1 Victoria Street, Wellington 6011, New Zealand, Ph 64-4-802 2212, e-mail [email protected], http://www.anz.co.nz

NEW ZEALAND ECONOMICS MARKET FOCUS - ANZ ......2015/07/27 · -trend pace as previous supports...

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