Sunday, March 19, 2017

NZD: Dovish RBNZ, weak Inflation, but relatively good data otherwise

In general the data from NZ is still not bad, though there seems to be a slightly recoiled. The inflation is  below the US and EU average. All this underpins RBNZ more dovish stance.

Central Bank and rates
RBNZ made clear that it intends to keep rates at the historical low 1.75% level in 2017. Governor Wheeler complained that the Kiwi was overvalued and the global risks arising mainly from protectionism led by USA remain.

In line with the RBNZ comments the 2Y yield is breaking out from the January range to the downside.

Economic Activity
GDP readings are at the upper side of the range, though exhibit downticks in the last two quarters.

ANZ Business Confidence is turning back fro the two years peak and is forming a slight downtrend, but the re readings are still not so bad.

The last quarterly reading of 0.40% is at the top of the range of the last three years. It seems that we would need a breakout from this range to turn RBNA to more hawkish. The last for quarter annualized level of 1.60% is way bellow the US and EU levels.

Labor Market
Unemployment rate last reading ticked up slightly, though the downtrend seems to be intact.

Retail sales in the last two were not particularly good.

On the other hand credit card spending show some level of consumer confidence.

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