Upcoming NZ Business Confidence29th May 2019
Overnight we have some key economic data coming out that could set up the NZD for the rest of the week. Coming up later, we have both policy discussions as well as politics potentially intruding in on the market. We could have some pretty active days for the Kiwi coming up.
We have the twice-annual RBNZ financial stability report and the new budget coming online. Both of these require quite a bit of poring over to understand the full implications for the market.
The Central Bank in Focus
Tonight we start with the release of the biannual RBNZ financial stability report. This is an important document to analyze. Basically, it’s the blueprint for the central bank for the next six months until the release of the next report.
We just recently had a cut in the rate, after which Governor Orr made it clear that another cut was in the cards, and soon. So, we’ll want to compare this stability report not only with the prior version to see what has changed but also the statement issued by the RBNZ regarding their outlook after the last rate cut.
The Market Reaction to Commentary
The release of the stability report could come with some volatility as the market parses the differences in comments. Generally, a dovish tone has been priced into the market. We could expect the trend to continue if the report shows reasons for a future rate cut.
However, there is a bit of an upside risk if the report comes in too upbeat, especially in regards to inflation expectations. This could put the next rate further ahead than the market expects, and give a kick to the NZD.
Later in the week, the Governor will basically summarize the RBZN’s views in two speeches; one a press conference on the 29, and later in testimony to the Parliament. Generally, there aren’t any changes to report from those events. However, it’s a good idea to keep their schedule in mind, since Orr could let slip a change in policy, or take the opportunity to address a particular issue.
In the wee hours of the morning tomorrow, we have the ANZ Business Confidence indicator. This is expected to track further into pessimism at -42.7% compared to the -37.5% registered prior. The indicator is expected to be pulled down by trade concerns; it’s on it’s longest negative streak since the ’08 crisis.
Early on the 30th, we have building consents. These are expected to pop back into positive after a negative month. It is common for this indicator to bump up and down, and it’s still within its average range. With New Zealand largely avoiding a housing crisis for now, unless there is a major shift in results, the data is likely to confirm current financing and consumer trends.
There’s been quite a bit of press anticipation to this year’s budget. It has been billed as the first “Wellbeing Budget” reflecting the switch in Arden’s government from market-oriented policies to more social oriented ones. The end of “NZ Inc” however, in reality, isn’t expected to have a lot of major changes in the actual government spending policy.
Still, policy analysts will be poring over the document to see what changes there are, and how that will likely affect the economy. One of the open questions is what is the government going to do with the accumulated surplus over the last year of relatively good performance? Since the economic outlook seems grimmer in the near term.
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