fxmatters

Last week was not a good week for Australia, and I am not referring to Eden Park. The AUD was weakest of 38 currencies monitored here. That has not been the case in a long time. Part of issue is the recent peaking of commodity prices. More significantly the market is now focusing on the next move by the RBA being an easing (see interest rate futures), possibly as early as September (but not this week, surely?).

Now this is great news for NZ exporters – if the NZD is to reach generally low levels it will most likely require a weak AUD also. The problem is, at least as I see it, that things are not all bad across the Tasman. Confidence levels are down sharply but export prices remain extraordinarily high. The monthly Australian employment figures released this week (see calendar) are likely to show continued job growth and low unemployment. The market appears to be getting a little ahead of itself expecting the RBA to ease soon with labour markets tight and inflation above 4%. This suggests a choppy AUD in the weeks ahead, rather than a one-way fall.

The short of it for the NZD is maybe we get to see the NZD/AUD run back up towards 80c now but longer-term the NZD/AUD looks set to trend lower yet. We may also get to see the NZD/USD push towards 70c but don’t be too confident of a shift down in the 60s just yet.