Emigration Market News

13/01/2010

Australia

Sterling found a degree of stability against the Australian dollar in thin December markets, trading in a relatively tight range almost identical to that seen in November. When the dust settled on the month, the pound had made a meagre net gain of less than a cent while over the course of the year it posted a net loss of over 27 cents, or 13.2%.

With no central bank meeting in Australia this month, interest rates remain at 3.75%, well above the 0.5% rates in the UK and at a level which continues to attract investor funds. While risk appetite in financial markets remains healthy, an already strong dollar is likely to remain in demand.

Data wise, the rate hike at the beginning of last month actually had little impact on £-aud while the accompanying statement continued the upbeat theme. Very strong employment numbers together with rising business confidence did however give the dollar another leg up. With a lot of the ‘good news’ already built into the price, the minutes of the central bank meeting showing the decision to hike rates was ‘finely balanced’ together with weaker than expected Q3 GDP growth saw the pound recover some lost ground to test close to 8-week highs around the A$1.83 level.

As we begin a new decade, ‘normal’ service has resumed with both strong building approvals and retail sales driving the dollar higher to send the pound to levels not seen since March 1985.

Looking ahead, there is very little technically to stop the pound falling all the way to A$1.60 although some signs of daily and monthly momentum studies taking a turn for the better could at least delay this outcome. Initial recovery target is A$1.7700/1.7820 then A$1.8000/60 and A$1.8300/60. Beyond here needed reduce the threat of $1.60 and brighten the outlook for the pound suggesting potential to test the dizzy heights of A$1.90/1.95.

                                             Australia                           UK
Interest rates                  3.75%                                 0.50%
Unemployment Rate      5.7%                                   7.9%
CPI Inflation                      +1.3% y/y to Sep ‘09        +1.9 y/y to Nov ‘09
GDP                                    0.2% q/q to Sep ‘09        -0.2% q/q to Sep ‘09

 

New Zealand

Another tough month for the pound against the New Zealand dollar with almost 6 cents, or 2.5%, lost in December while we closed the year down a net 29 cents (11.5%).

Interest rates in New Zealand remained on hold at 2.5%, as they have since April last year, although the central bank have indicated rate hikes in the second half of this year if the economy continues to recover. Yet again, the central bank (RBNZ) bemoaned the strength on the dollar and its limiting affect on exports contributing to a recovery.

Despite business confidence dipping in December, the trend remains positive although the RBNZ note actual business spending remains weak. A second successive quarter of growth was recorded in Q3, equalling the upwardly revised 0.2% growth in Q2 but it is clear the authorities remain uncertain about the durability of growth.

In a similar vein to its larger neighbour, daily and monthly momentum indicators suggest potential for £-nzd to recover from the 12-week lows posted last week and these are supported by the fact the multi year lows (NZ$2.1300) seen in October have remained out of reach. However, clearing NZ$2.1930/2.2065 at a minimum is required to relieve some of the overall bearish pressure and allow gains towards the NZ$2.24/2.26 area. Beyond this latter resistance zone would put the pound on a slightly firmer footing with potential from there towards NZ$2.2875 and NZ$2.3180/2.3385. Immediate downside risk should the NZ$2.13 level give way is to NZ$2.1080/00.

                                            New Zealand                    UK
Interest rates                  2.50%                                 0.50%
Unemployment Rate      6.5%                                   7.9%
CPI Inflation                      +1.3% y/y to Sep ‘09        +1.9 y/y to Nov ‘09
GDP                                    0.2% q/q to Sep ‘09        -0.2% q/q to Sep ‘09

Canada

A poor end to a poor year for £-cad as it ended on its lowest monthly close since April 1985 (1.7027) having lost a net 3 cents in December and 8 cents (4.5%) over the course of the year.

No change again in December to the target interest rates as they remained at 0.25% for the eighth consecutive month. The central bank (BoC) see a modest improvement in the global outlook but does not expect a shift in interest rate until the second half of this year as overall risks to inflation remain skewed to the downside. Once again, currency strength was highlighted as a drag on growth.

Jobs growth in November far exceeded expectations of a modest 15k rise as over 79,000 jobs were added in the month bringing the unemployment rate down to 8.5%. The December figure has already been released and slightly tempered this euphoria with a loss of just over 2,500 jobs. After three consecutive quarters of negative growth, Canada returned to growth in Q3 last year with a modest 0.1% expansion.

An unconvincing start to this year for the pound as it lost a further 6 cents from the December close but at the time of writing is staging a recovery. The low seen last week around C$1.64 came without the back up of momentum but we would need to see a break back above C$1.7070 then C$1.7250/1.7300 to reduce some of the immediate downside pressure and suggest potential to push up towards C$1.77/1.79. In turn, this would be the gateway to C$1.8150. Downside risks at the moment are defined by C$1.65/1.64 and the C$1.6240 low from last October below which there is little in the way of support until C$1.60 then all the way down to C$1.52.

                                           Canada                               UK
Interest rates                  0.25%                                 0.50%
Unemployment Rate      8.5%                                   7.9%
CPI Inflation                      1.0% y/y to Nov ‘09        +1.9 y/y to Nov ‘09
GDP                                    0.1% q/q to Sep ‘09        -0.2% q/q to Sep ‘09

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