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March 2016

NZD volatility due overnight

Published: Wednesday 16 March 2016

  • NZD volatility due overnight
  • Sterling poised for good unemployment data and tinkering budget
  • USD awaits inflation and Fed decision

It is budget day in the UK and every commentator who walks and crawls the earth has a view on what the Chancellor will say when he flicks that red box open and stands in the House of Commons at 12:30 GMT. It's a bit like the commentators before a football match telling you who is going to win and who will fail and why – in their humble opinion – that will happen. Truth be told, we are all in the dark but, with an EU exit vote on the horizon, we have to assume George Osborne will go easy on the electorate because he wants them to like the government when they go into that little booth to cast their vote on 23rd June. 'Tinkering' is my word for the day.
Sterling is largely ignoring the budget at the moment but it may react positively to this morning's unemployment data which out to show another fall in jobless claimants. There is also a feeling that wage growth may be improving to 2.0% and that would warm the cockles of the chancellor's heart; assuming he has one of course, but he is an MP, so let's not assume.
Away from the UK budget, the US Dollar is a tad weaker after softer than forecast US retail sales figures. This is another stat that will make the Federal Reserve wonder what they were thinking when they started raising the base rate in December. It sent stock markets down and increased demand for Government bonds; a sure sign of nervousness in the markets. The Fed meets later today to discuss interest rate and, whilst they are highly unlikely to reverse the December hike (that would be embarrassing); they are sure as hell not ready to raise rates again. An on hold decision is inevitable.
But before the Fed makes its announcement, we will get US inflation data. There is a very strong chance the annualised CPI rate will be down below 1% but core inflation should hold up reasonably well. We will also see industrial and manufacturing production data which is all forecast to be bad news. I still don't think the Fed will have the guts to cut the base rate again.
Overnight tonight we will also get New Zealand's economic growth data. A slight decline in the GDP growth rate is expected, so there will be opportunity for automated orders to grab NZD at more affordable levels overnight. Have a chat with your Halo consultant about how you might make best use of the almost inevitable volatility.
And the Daily Mirror is reporting that Ryanair may have just provided the answer to those who are scared of flying. When asked by a passenger whether they could take a parachute onto a flight as hand luggage, the answer was 'Yes'. So, if a few of your friends are flying together, one could bring parachutes, one a life raft, another a survival pack and, just a thought, it may be worth flying with a wetsuit under your clothes. Well you never know!


A Pilot and Co-Pilot are readying the aircraft for departure when the Chief Steward comes onto the flight deck and says that their new Stewardess has not arrived. "I don't know where she is Captain. She is a really lovely girl but a bit ditzy, if you know what I mean."
"Have you tried calling her?" says the Captain. 
"No answer on her mobile," says the Chief Steward. "Do you know which hotel she was staying at?"
"She was at the Hilton," says the Co-Pilot.
The Chief Steward calls the Hotel and asks the Receptionist if someone could check her room. A few minutes later he receives a call from a hotel porter saying he has found the Stewardess in her room. "She is quite distressed but she's like to speak with you," he says.
A moment later a female voice comes on the line. She is clearly sobbing, "I am so sorry." She says. "I know I am late but I couldn't get out of my room. There are only two doors you see. One is the bathroom and the other...well I didn't know what to do because it had a 'Do Not Disturb' sign hanging on the handle".
Market BST Data/Event Previous Expected
GBP 09:30 UK: ILO unemployment rate, % 5.1 5.1
GBP 09:30 UK: Jobless claimant count, k  -14.8 -13.2
GBP 09:30 UK: Average weekly earnings, % 3m/y 1.9 2.0
USD 12:30 US: Building permits, k saar 1202 1201
USD 12:30 US: CPI, % m/m (y/y) 0.0 -0.2
USD 12:30 US: Core CPI, % m/m (y/y) 0.3 0.1
USD 13:15 US: Industrial production, % m/m 0.9 -0.2
NZD 21:45 New Zealand: GDP, % q/q 0.9 0.7

FX Research by David Johnson

Daily Currency Analysis with Michael Hart

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