Even slower NZ economy affirms the downward NZD trend
Early figures point to June as having been a slow month for NZ retailers. The combination of cold weather, short days, high petrol prices, high interest rates and falling share prices is taking its toll. But the National Bank June survey also shows more people intending to raise their prices. This mix of slow activity but strong inflation pressures is likely to be repeated in the NZIER survey released Tuesday (Calendar). With activity and prices seemingly determined to head in different directions, the RBNZ face a tough decision on the 24th (Central Bank Watch). The economy is slow enough to keep the bias towards an easing, although probably not this month.
The telling point for the NZD/AUD will probably come Thursday. Last month the Australian employment figures were weak. A similar report Thursday, coming after the on-hold RBA decision last week, could see the AUD drop, and cause the NZD/AUD to rebound to near 80c again.
The third major part of the NZ dollar equation is the US dollar. It rallied a little last week. But the lower US interest rates (Interest Rate Futures) and the still-weak share markets suggest the USD is more likely to weaken, rather than strengthen, at present.
The end result could be the NZD higher against the USD and AUD this week. But any rally is likely to be temporary, as the soft NZ economy sets the scene for a downward trending NZD over the second half of 2008.
