Emigration Market News

14/04/2010

Australia

Yet another disappointing month for the pound in March as it once again gave up further ground, hitting fresh 25-year lows against the Australian dollar.

At the beginning of this month, the Australian central bank (RBA) again raised interest rates by 25bp to 4.25%, further normalising the accommodative rates introduced at the peak of the global crisis. This was the fifth such rise since last October when rates were at 3.00%. The accompanying statement leaves room for yet more rate rises over the course of the year. However, RBA assistant governor Guy Debelle tempered expectation slightly in stating that policy tightening would be towards average rates but that this point was not far off. Current consensus suggest s year end rate between 4.75% and 5.00%.

Data releases from Australia continued to back up the rate hikes. Q4 GDP came in at 0.9% and together with upward revision to previous quarters, helped produce annualised growth of 2.7%. Retail sales were much stronger than anticipated while both business and consumer confidence continued to rise. Employment has been mixed with February almost flat while this month’s return for March showed a 20k increase. The unemployment rate has remained low at 5.3% throughout. One note of caution regarding rate hikes comes from home loans which fell in both January and February as the normalisation of rates takes effect.

Technically, the move towards the previously mentioned A$1.60 level has all but been fulfilled with last months low around A$1.6250. While further losses cannot be discounted, the balance of risk may finally be turning in favour of the pound following an 18-month and near 40% fall. The obvious supports are therefore 1.6250 and 1.6000. Initial resistance now sits at 1.6760, a break of which would give scope to for recovery towards 1.7000/25, 1.7190 and 1.7265.

                                            Australia                           UK
Interest rates                  4.25%                                0.50%
Unemployment Rate      5.3%                                  7.8%
CPI Inflation                      +2.1% y/y to Dec ‘09       +3.0 y/y to Feb ‘10
GDP                                     0.9% q/q to Dec ‘09        0.4% q/q to Dec ‘09

New Zealand

The pound slumped against the NZ$ again in March, to a low of NZ$2.0920, levels not seen since October 1979.
 
Once again, no change from the central bank (RBNZ) last month with rates held at 2.5%RBNZ governor Bollard noted in the accompanying statement that the ‘economy is recovering broadly as expected’ and that ‘growth is predicted to pick up further through 2010.’ Rate hikes would still appear to be on hold until around the middle of the year.

Data wise, a pick up in retail sales confirms improving consumer confidence although both credit growth and the housing market remain subdued. Business confidence has also improved markedly although this has yet to translate into spending.

Looking at the charts, the recovery of sorts in the final few days of the month from the multi-year lows ensured the long term trading channel remained intact. The base of this channel is currently 2.1360 and this, along with 2.1080, 2.0920 and 2.0750 provide crucial support. Initial recovery target is 2.1700/65 followed by 2.1830. Above here is needed to suggest potential for a more prolonged recovery towards 2.2115/65 and 2.2400.

                                            New Zealand                  UK
Interest rates                  2.50%                               0.50%
Unemployment Rate      7.3%                                 7.8%
CPI Inflation                     +2.0% y/y to Dec ‘09       +3.0 y/y to Feb ‘10
GDP                                      0.8% q/q to Dec ‘09      0.4% q/q to Dec ‘09

Canada

Another month of despair for the pound as £-cad hit another 25-year low of 1.5125.
 
Interest rates were once again held at 0.25% with the Bank of Canada reiterating this is likely to remain the case until the end of this quarter. Domestic spending and continued export recovery have helped growth and the level of economic activity has been greater than that projected in the central bank report in January. Not surprisingly, with the Canadian dollar hitting a 21-month high against the US dollar and coming close to the psychological parity level, the strength of the local dollar was once again highlighted as a drag on the economy. Inflation expectations remain balanced as in January, hence the stable outlook for interest rates until the second half of the year. Meanwhile, the Canadian Finance Minister noted the rise in the C$ has been in part due to a ‘relatively strong’ fiscal position.

Unemployment fell back slightly to 8.2% in February and has held steady at this level with close to 39,000 jobs added between February and March. Retail sales, manufacturing sales and CPI all exceeded expectations and the Ivey purchasing managers index at the beginning of this month completed a round of strong data , driven primarily by a sharp rise in the employment component.

Technically, a potential ‘double bottom’ has formed with the break above 1.5450 but the upside target for the signal is not huge at 1.5775. However, a break of congestion around 1.5625 would do the pound no harm with potential towards 1.6040 and 1.6250 if seen. Meanwhile, support lies at 1.5290 and 1.5170/25. If the latter level gives way to another multi-year low, the psychological 1.5000 level and 1.4925 are the next downside targets to monitor.

                                            Canada                           UK
Interest rates                  0.25%                              0.50%
Unemployment Rate      8.2%                                7.8%
CPI Inflation                     1.6% y/y to Feb ‘10      +3.0 y/y to Feb ‘10
GDP                                    1.2% q/q to Dec ‘09      0.4% q/q to Dec ‘09

<<Back