http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/http://www.fxstreet.com/fundamental/http://mediaserver.fxstreet.com/images/fxstreet-provider-logo1-en.gif7http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-11-16.htmlThe Reserve Bank’s Financial Stability Report, its six-monthly health check of the financial system, highlighted the risks around New Zealand’s economic recovery and shed some valuable light on a few important issues. The international environment has come a long way since the last report in May. Most major economies have either resumed growth or are not far from it, confidence has improved, equities are soaring, and credit markets are back in action. The RBNZ notes that this turnaround hasMon, 16 Nov 2009 06:03:40 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-11-16.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-11-09.htmlLast week’s data confirmed the severe toll that the recent recession has taken on New Zealand’s labour market. The Household Labour Force Survey for the September quarter saw the unemployment rate jump a further halfpercentage point to 6.5%, the highest level in nine years. Although the unemployment rate is much lower than the early-1990s recession, the rate of increase has been every bit as severe. We always expected this data to reflect the recession just past, rather than the recent flushMon, 09 Nov 2009 06:55:12 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-11-09.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-11-02.htmlThe RBNZ’s decision to leave the cash rate on hold at 2.50% came as no surprise, but the focus was on whether they would alter or replace the ‘bias’ sentence at the end of the statement. In recent statements, the RBNZ have noted that “we continue to expect to keep the OCR at or below the current level through until the latter part of 2010.” Our view was that, with the recovery unfolding rapidly, the RBNZ would give themselves more flexibility with a statement along the lines of “it isMon, 02 Nov 2009 05:54:41 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-11-02.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-10-27.htmlIt was a quiet week for NZ data, with all eyes on the Reserve Bank of NZ and their review of the official cash rate on Thursday. No one expects a change in rates, but the press statement will be keenly dissected for hints regarding when the first hike is likely to come. This week saw another modest upwards revision to Consensus growth forecasts for New Zealand’s trading partners for 2009 and 2010. This is the fifth consecutive upward revision. Growth next year is now expected to be only aTue, 27 Oct 2009 06:17:21 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-10-27.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-10-19.htmlThe recent run of data accentuating the economic recovery – and the stubbornness of domestic inflation – has brought forward the likely timing of the next interest rate cycle. We now expect the RBNZ to begin tightening in 25bp clips from March 2010. Indeed, a case can be made for an even earlier start, but we’re not convinced that the RBNZ will be prepared to do an about-face on its recent dovish rhetoric too quickly. Retail sales rose 1.1% in August, more than twice as strong as we or theMon, 19 Oct 2009 06:00:16 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-10-19.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-10-12.htmlThe positive New Zealand data continued last week, though there was nothing to match the fireworks in the Australian market. The September Quarterly Survey of Business Opinion showed that business sentiment has improved markedly since the depths of the recession earlier this year. Expectations of general conditions for the next six months soared to their highest in ten years, while own-activity expectations rose to slightly above their long-term average. But the details of the survey, whileMon, 12 Oct 2009 07:23:00 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-10-12.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-10-05.htmlThe local data calendar has lately been dominated by confidence surveys, all of which have been notably positive. The NBNZ business confidence survey rose sharply for the sixth straight month, with general business conditions reaching their highest since April 1999 and own-activity expectations the highest since June 2002. The latter measure is a useful indicator for contemporaneous GDP, and at face value the readings over the September quarter are consistent with growth in excess of 1% – thisMon, 05 Oct 2009 08:06:22 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-10-05.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-09-28.htmlWhat a week. A whopping improvement in the current account deficit, a big upward revision to the dairy payout, an official – if tenuous – end to the recession, a huge leap in consumer confidence: no wonder the NZD was on a flyer. The current account balance staged a spectacular improvement in the June quarter. The annual deficit narrowed sharply to 5.9% of GDP, from a revised 8.1% in the year to March (was 8.4%). The goods balance (s.a.) was again in surplus despite the higher NZD: strongMon, 28 Sep 2009 07:40:00 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-09-28.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-09-21.htmlLast week was mostly about putting the final pieces together for June quarter GDP, to be released on Wednesday. We estimate that GDP fell by 0.2% in Q2. Having said that, we think that the economy was probably expanding again by the end of the quarter, and given the usual error bands around these estimates, it’s possible that growth may have even been positive on a quarterly basis. Either way, leading indicators are increasingly pointing to growth in Q3. The substantial interest rate cuts overMon, 21 Sep 2009 08:19:09 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-09-21.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-09-14.htmlThe Reserve Bank left the cash rate on hold at 2.50% last week as expected, and maintained the slightest trace of an easing bias. The most significant change was that the explicit statement that “the OCR could still move modestly lower over the coming quarters” was removed, but they repeated that it was expected to remain “at or below” the current level until the latter part of 2010. The RBNZ acknowledged the ongoing signs of recovery in the global and domestic economies, but as we warned,Mon, 14 Sep 2009 10:56:27 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-09-14.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-09-07.htmlThe RBNZ laid out a stark warning in the July OCR review, hinting that further rate cuts could be on the cards if financial conditions don’t ease in line with their projections. There’s no doubt that the high NZ dollar is a significant concern for the RBNZ, perhaps even more than the market realises. But on the other hand, we think there has been enough evidence about the pace of the global recovery – and more importantly, New Zealand’s place in that recovery – to assuage many of the RBNZ’sMon, 07 Sep 2009 08:36:02 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-09-07.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-08-31.htmlThe Government’s decision to extend the retail deposit guarantee scheme will alleviate a source of uncertainty for the finance industry, but still leaves some tough questions. The deposit guarantee was introduced last October at the height of the credit crisis, when many countries were introducing or expanding government protection for retail deposits. The concern at the time was that without a similar guarantee in NZ, depositors would flee offshore (specifically to Australia) to benefit fromMon, 31 Aug 2009 07:04:08 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-08-31.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-08-24.htmlIt was a fairly slow week on the domestic front, with the main release of international travel and migration turning out much as expected. Net migration was strong again in July, with a seasonally adjusted inflow of 2,470 people. The surge in net migration to date this year has primarily been driven by fewer New Zealanders leaving for Australia, with permanent and longterm departures down 42% on a year ago. However, in the last few months we have also seen a strong increase in the number ofMon, 24 Aug 2009 06:45:53 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-08-24.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-08-17.htmlLast week’s data provided further evidence that consumers are finding their feet again, following a protracted retreat over the last two years. Retail sales held their ground in June, following gains of 1.2% in the previous two months. Clothing sales slowed as expected in June, as unusually cold weather saw spending on winter woollies brought forward to May. However, appliance sales were up nearly 10%, which is likely to be a product of the pickup in housing market activity. That left retailMon, 17 Aug 2009 05:24:18 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-08-17.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-08-10.htmlLast week’s data was a mixed bag, with weak labour data confirming how tough times have been, but some encouraging signs on commodity prices. The focus this week is on the consumer, with data on spending and housing. Both should continue to tell a story of gradual recovery. Tuesday’s Labour Cost Index (LCI) Q2 wage data came in weaker than expected, with private sector all salary and wage rates increasing just 0.3% in the quarter. Rising unemployment and lower inflation are now clearly takingMon, 10 Aug 2009 05:04:16 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-08-10.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-08-03.htmlThe RBNZ struck a surprisingly dovish chord in last week’s OCR review, reiterating that the OCR could still move lower in coming quarters and that it would remain at or below current levels until the latter part of 2010. The tone of the statement was, if anything, more downbeat than in the June Monetary Policy Statement. There was no acknowledgement of the improving global outlook, which other central banks have picked up on recently, or the domestic factors that are setting the stage forMon, 03 Aug 2009 05:40:56 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-08-03.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-07-27.htmlRBNZ Governor Bollard’s speech on 14 July, simply titled “Economic Recovery”, gives a clear indication of what to expect from Thursday’s OCR review. Compared to the June Monetary Policy Statement, the RBNZ appears more confident that the global economy is stabilising and that New Zealand is entering the recovery phase; the main question now is what form the recovery will take. But with the prospect of recovery comes a growing concern that households could revert to their previous ‘borrow andMon, 27 Jul 2009 05:47:11 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-07-27.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-07-20.htmlLast week saw an increased focus among officials on the prospects for recovery in New Zealand, and the accompanying risks. In a speech on Tuesday, RBNZ Governor Bollard said there are early signs that the global economy is starting to recover, and noted that New Zealand could recover more rapidly than many of our major trading partners. As detailed in our latest quarterly Economic Overview, also published last week, we share this assessment. The prospects of a more rapid exit from recession inMon, 20 Jul 2009 06:01:42 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-07-20.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-07-13.htmlRecent economic indicators in New Zealand have continued to strike a note of cautious optimism. The June Quarterly Survey of Business Opinion showed that business sentiment has improved since the dark days of March, with general business conditions rising from a net -65% in March to -25% in June. As with the ‘green shoots’ that have been emerging in the global and domestic economies, the claim is a fairly modest one: activity in the June quarter appears to have fallen at a slower pace. But theMon, 13 Jul 2009 06:08:41 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-07-13.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-07-06.htmlWith the New Zealand economy showing some signs of stabilisation, we have revised our interest rate forecasts and no longer anticipate further OCR cuts in this cycle. Over recent months the RBNZ will have noted the resilience of activity in developing Asia and Australia, an improvement in credit market conditions, rising business and consumer confidence, a pickup in the housing market, and a strong turnaround in net migration. The latter is particularly important for the RBNZ. Just a fewMon, 06 Jul 2009 07:08:01 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-07-06.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-06-29.htmlNew Zealand remained deep in the grips of recession in the first quarter of this year. However, more recent indicators suggest that the economy may be entering a bottoming-out phase. GDP fell by 1% in the March quarter, following the same-sized contraction in the December 2008 quarter (revised down from -0.9%). That makes it five straight quarters of decline in the current recession, something that hasn’t been observed since the official statistics began in 1977. The fall was close to ourMon, 29 Jun 2009 05:36:21 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-06-29.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-06-22.htmlThe sole piece of domestic data last week was a surprising 0.2% lift in manufacturing sales. However, the rosy headline was entirely due to a 23% lift in sales of dairy, most probably reflecting inventory reduction. The rest of the survey implied dire falls in production for most industries, and an extremely weak quarter for manufacturing. This week’s data calendar is fairly full, starting with net migration today. Net migration has been rising sharply over the past few months, as the numberMon, 22 Jun 2009 07:23:51 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-06-22.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-06-15.htmlThe RBNZ left the cash rate unchanged at 2.50% last week, which was seen by financial markets and most domestic forecasters as the most likely outcome. The RBNZ repeated the message from the April OCR review that further modest rate cuts are possible (though not their central view), and that the cash rate is expected to remain at or below the current level until the latter part of 2010. The RBNZ noted that the economic outlook is weaker than in their March Monetary Policy Statement, and withMon, 15 Jun 2009 05:50:27 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-06-15.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-06-08.htmlThursday’s Monetary Policy Statement comes at an interesting juncture for the New Zealand economy. Activity is still contracting in most parts of the world, but at a slower pace than seen earlier this year – and for a change, the outlook for growth doesn’t seem to have deteriorated further since the last OCR review. Meanwhile, financial markets are sending a clear signal that they believe the worst-case scenarios for the global economy have been avoided. It’s clear from the RBNZ’s recentMon, 08 Jun 2009 06:33:44 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-06-08.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-06-02.htmlLast week’s Budget was a reflection of the tough times, striking a balance between supporting the economy through the recession in the short term, and implementing fiscal discipline further out. While it wasn’t as frugal as we thought it could have been, it was enough to satisfy the credit rating agencies. As expected, the Budget revealed a worse economic picture underpinning the fiscal forecasts than depicted in the half-year update in December. Real GDP growth is forecast to remain wellTue, 02 Jun 2009 04:50:00 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-06-02.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-05-25.htmlThe events calendar for New Zealand turns heavier over this week, with the key event being the new National Government’s first Budget on Thursday. The stakes are high for this year’s Budget. Government revenues are falling dramatically as the global downturn hits the domestic economy hard, while the legacy of the previous Government’s bigspending ways is that expense growth is well entrenched and rising. If previously budgeted increases in new spending were retained, it is expected thatMon, 25 May 2009 05:24:09 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-05-25.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-05-18.htmlWhile recent data has shown some early signs of improvement, last week’s retail sales figures for Q1 showed that the New Zealand economy is coming from an even worse starting point than expected. Meanwhile, an RBNZ report highlighted some of the headwinds to a recovery. Consumer caution compounded retailers’ misery in the first quarter of 2009. The volume of sales plunged a record 2.9%, double the previous record decline set during the 1997 Asian crisis – and unlike then, the latest quarterlyMon, 18 May 2009 06:21:29 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-05-18.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-05-11.htmlLast week saw swap rates climb to near pre OCR announcement levels, while the NZD has soared more than 3 cents back through USD0.60. Some of this is attributable to the swathe of NZ labour market data released last week, which, on the whole, was not as weak as it might have been. However, the main factor has been an ongoing gravitation towards risk in international sentiment. We believe the surge of optimism is due to run out of puff soon, but picking the timing is fraught. The QuarterlyMon, 11 May 2009 05:51:57 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-05-11.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-05-04.htmlThe RBNZ delivered the 50 basis point rate cut that we expected last week, and gave a surprisingly clear signal about the path for interest rates in the foreseeable future. The main motivation for a large cut was the deterioration in the outlook for the global economy since the March Monetary Policy Statement. Despite talk of ‘green shoots’ in some regions (which mostly consist of activity falling at a slower pace), hopes for a nearterm recovery are rapidly fading. The latest Consensus growthMon, 04 May 2009 05:32:53 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-05-04.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-04-27.htmlMarkets will be intensely focused on what the RBNZ has to say at Thursday’s OCR review, following a rate cut in March that actually kicked off a substantial tightening in financial conditions. The outlook for the global economy has continued to deteriorate since the March Monetary Policy Statement. The latest growth forecasts by the IMF suggest that New Zealand’s major trading partners will contract by 2.8% this year and grow by just 0.8% in 2010 – this compares to the RBNZ’s March forecastsMon, 27 Apr 2009 05:31:42 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-04-27.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-04-20.htmlConsumer prices rose by a modest 0.3% in the March quarter, bringing annual inflation down to 3%, back (just) within the RBNZ’s 1-3% target band. This situation is unlikely to last long – disinflation will be the dominant theme of 2009, and the RBNZ will soon face a breach of the lower edge of the band. The details of the CPI were much in line with our expectations, with quarterly inflation being boosted by a 1.2% increase in food prices, along with the usual annual increases in tobacco exciseMon, 20 Apr 2009 05:45:15 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-04-20.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-04-14.htmlThe New Zealand economy, still wearing the bruises from the domestically driven recession of 2008, has had to contend with a deeper, globally driven downturn in the first half of 2009. And a key activity indicator last week provided little hope of a significant turnaround this year. The March Quarterly Survey of Business Opinion was, on balance, even weaker than the horrendous details of the December 2008 survey. Firms’ expectations of domestic trading activity picked up slightly, with a netTue, 14 Apr 2009 05:45:22 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-04-14.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-04-06.htmlVolatility reigned in New Zealand markets again this week. Financial conditions remain much tighter than the RBNZ was hoping for in the March Monetary Policy Statement, and tightened even further on balance this week – despite an unusual attempt by the RBNZ to talk the market down. A flurry of activity to lock in fixed-term mortgage rates has pushed interest rates sharply higher in recent weeks. The RBNZ provided the trigger for this in the March MPS by suggesting that the easing cycle isMon, 06 Apr 2009 05:47:01 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-04-06.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-03-30.htmlIt’s been another crazy week. Interest rates and the NZD both jumped again, with swap rates sitting some 30-40bp higher than a week ago, and the trade-weighted exchange rate index up another 3% on improved risk sentiment around the globe. Major banks increased their medium to long-term mortgage rates in response to the increases in wholesale rates. Financial conditions just keep going the wrong way for the Reserve Bank, and we continue to expect that the RBNZ will have to cut the Official CashMon, 30 Mar 2009 05:54:29 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-03-30.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-03-23.htmlLast week we pointed out that the RBNZ’s relatively optimistic growth forecasts were predicated on a much easier mix of financial conditions, with a lower New Zealand dollar expected to do most of the hard work. As if on cue, the NZD has soared since the Monetary Policy Statement: up more than 10% against the US dollar, and over 6% on the trade-weighted index. Combine this with the rise in wholesale interest rates since the MPS – which has been sustained despite a sharp drop in long-term ratesMon, 23 Mar 2009 05:47:32 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-03-23.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-03-16.htmlWe don’t think that the market has grasped the full message of the Reserve Bank’s latest Monetary Policy Statement. The RBNZ cut the cash rate by 50 basis points to 3.00%, a smaller move than we or the market were expecting, and indicated that any future cuts are likely to be smaller than those seen in recent times. The 525bp of rate cuts since July last year, the steep fall in the currency, and a strong fiscal impulse mean that a lot of stimulus has been applied to the economy in a shortMon, 16 Mar 2009 05:45:49 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-03-16.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-03-09.htmlThe RBNZ delivers its latest Monetary Policy Statement on Thursday, in the midst of a collapsing world economy, plunging share markets, mounting job losses, and extreme measures to revitalise the global financial system. In other words, just another day at the office. So far the RBNZ has taken a very assertive approach through this easing cycle – identifying the likely low point for interest rates and delivering most of the expected easing in one hit. This hasn’t always been clear at faceMon, 09 Mar 2009 05:45:47 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-03-09.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-03-02.htmlAs hundreds of business leaders gathered at the Government’s Jobs Summit last Friday to generate ideas for saving or creating jobs, the week’s data highlighted the extent of the threat to the jobs market. The NBNZ business confidence survey for February was extremely weak, with a net 41% of firms expecting overall conditions to deteriorate over the next year. Own-activity expectations ticked up slightly to a net -20%, but this was still easily the second-worst read in the 20-year history ofMon, 02 Mar 2009 05:54:23 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-03-02.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-02-23.htmlWe have revised down our interest rate forecasts, and we now expect the RBNZ to cut the cash rate by 100bp at the March Monetary Policy Statement. After the January OCR review we noted: “we think that 50bp is in the bag for the March MPS, and any further bad news on the global economy will increase the odds of a larger move.” The most recent developments have certainly fit the bill. Around the world, GDP figures for Q4 2008 are shaping up to be absolute shockers, and more recent data onMon, 23 Feb 2009 06:11:26 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-02-23.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-02-16.htmlNew Zealand consumers have become cautious. Carefree spending seems to be a thing of the past. The official retail sales data for the last quarter of 2008 confirms what we already suspected – consumers have largely put away their purses and wallets. Christmas was not a good one for retailers. Retail sales in Q4 provide more evidence that consumers have been saving their extra cash from tax cuts, lower interest rates and lower fuel prices. The value of sales in Q4 2008 was 1.5% below year agoMon, 16 Feb 2009 05:43:28 GMThttp://www.fxstreet.com/fundamental/analysis-reports/natalie_denne@westpac.co.nz (Westpac Institutional Bank)http://www.fxstreet.com/fundamental/analysis-reports/weekly-commentary/2009-02-16.html