CURRENCY WATCH
FX Fig. 1 – Exchange rate and policy rates
the Labour Party – and the new Premier Jacinda Ardern – supported by the populist and nationalist party New Zealand First, and by the Green party. Te Labour manifesto is mostly addressed to relaunching the domestic labour market by raising the minimum wage and tightening immigration controls (this latter point shared – in principle – with the NZF), and to solving the housing crisis. However, there are many unknowns with such a government formation, and the nationalistic agenda of the NZF (which aims to introduce strict anti-immigration measures and calls for a nationalisation of banks), as well as the intention to put in place actions to reduce the inflow of foreign capitals to the domestic real estate market, are of concern to the financial markets, and have affected the New Zealand dollar, also weakened by the proposal made by the new government to modify the central bank’s mandate, currently centred on inflation targeting, by introducing a dual mandate of supporting employment, as well as targeting inflation. Tis has raised concerns of the RBNZ finding its independence at risk. Te recent appointment, on 11 December, of Adrian Orr at the helm of the RBNZ, whose term will start in March (Graeme Wheeler’s term expired in August, and was temporarily replaced in September by Grant Spencer), offered some respite to the exchange rate (which rose back from NZD/USD 0.68 to 0.70), as Orr was formerly a member of the central bank’s board and therefore is not an “unknown” factor at time when the uncertainties posed by the new government coalition are many.
Fig. 3 – EUR/NZD
Fig. 5 – Nominal effective exchange rate (BIS) Source: Tomson Reuters-Datastream
For what concerns the macro scenario in strict terms, at its latest meeting on 8 November, the RBNZ reasserted that the growth picture remains favourable, thanks to persistently accommodative monetary policy conditions and to stronger fiscal stimulus, and expects an acceleration in growth next year from 3.0% estimated in fiscal year1 2017-18 to 3.5% in the following. On the inflation front, a new decline is forecast in the next few months, to 1.5% in 1Q 2018, followed by a return to target (2.0%) already in the remainder of 2018. However, the RBNZ reasserted that external pressures on the inflation trend are still modest, and explained that the recent rise is mostly due to the weakness of the exchange rate and to the oil price increase. In light of the inflation trend and of the many uncertainties that still exist at the global level (with the addition of a
FX TRADER MAGAZINE January - March 2018 27
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76
