New Zealand Market Update - April

05/04/2012

Currency Overview

Sterling gained almost five cents (2.5%) on the NZ$ in March but remains nearly four cents below the year’s opening level.

Central Bank Policy

Interest rates in New Zealand remained at 2.5% at the March policy meeting. RBNZ Governor Bollard was dovish, noting interest rates could even fall again if the concerning appreciation of the NZ dollar continued. There is no central bank meeting scheduled until April 25th where the official cash rate is once again expected to remain on hold.

Data releases

Official data releases from New Zealand were as usual few and far between but there was a notable positive slant to those that were delivered. Manufacturing activity rose to 57.7 in February, its highest level in almost 2 ½ years and a record for February. Business confidence, a measure of sentiment over the next 12 months, rose to a six month high of 33.8%. Although a little more backward looking, fourth quarter GDP was a disappointment, coming in at 0.3% against expectations of 0.6% growth. Consumers were less upbeat with only a modest rise in confidence for the first quarter of this year leaving the index well below levels seen pre earthquake.

Technical Outlook
 

Indecision and the failure to create a new low in February led to a mild pullback for sterling in March. The next hurdles will be to clear 1.9600, 1.9670/1.9700 then the 50% retracement of the 2.1040/1.8635 fall at 1.9840. If these levels can be regained, sterling would be better placed to tackle the psychological 2.0000 level and the 2.0250 bear trendline. Support now at 1.9220, 1.9010/00 and 1.8760/1.8635.

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