Dollar outlook: Kiwi may fall on growth concerns, ECB inaction

BUSINESSDESK: The New Zealand dollar may fall this week amid continued concern that global growth remains stalled as investors await news of European Central Bank action.

The kiwi recently traded at 81.16 US cents, little changed from 81.13 cents at 8am. That is in the middle of this week's forecast trading range of 80 cents to 82.30 cents, according to a BusinessDesk survey of five analysts.

All of the analysts surveyed predict the kiwi will finish the week lower.

Figures on Friday showed China's exports grew a lower-than-expected 1% in July and economists predict data out of Europe this week will show the region’s economy contracted for a second quarter.

Spanish and Italian two-year notes fell on speculation the European Central Bank will no longer buy government debt.

German Chancellor Angela Merkel returns from a two-week holiday tomorrow and hasn't yet commented on the European Central Bank’s plans to buy bonds to help ease the eurozone debt crisis. Details of the plan will be released in coming weeks.

"You will get comment out of the ECB this week," said Alex Sinton, senior dealer at ANZ New Zealand. "Is it around a solution? I doubt it. Is it around that we recognise how tough things are? Most likely. It will not paint anything new."

Economists predict data out of Europe overnight tomorrow will show the region’s economy contracted for a second quarter.

Gross domestic product in the eurozone shrank 0.2% in the June quarter, following a 0.1% decline in the previous three months, according to a Bloomberg poll.

That has prompted talk powerhouse Germany may be pulled into recession before the end of the year.

The UK's consumer price index will be released on Wednesday, followed by minutes from the Bank of England's August meeting the next day. Then comes British retail sales data on Friday.

The kiwi was little changed at 51.80 British pence from 51.77 pence.

Data out of the US this week will offer a raft of fresh clues about the state of the world's largest economy. Retail sales, business inventories, the consumer price index, industrial production and housing starts are all set for release.

Commerce Department data out late tomorrow is expected to show that sales at American retailers advanced in July for the first time in four months.

"The US data should be better than expected," said Imre Speizer, market strategist at Westpac Banking Corp. "That might be bad for risk because it implies less chance of quantitative easing."

Australia, New Zealand biggest export market, will release its business confidence figures tomorrow, followed by consumer confidence and wage costs on Wednesday. The kiwi rose to 76.95 Australian cents from 76.79 cents at 8am.

New Zealand's food price index rose 0.2% in July for a 1.8% fall in the year, according to Statistics New Zealand figures today.

The retail trade survey for the June quarter is due tomorrow and Fonterra's GlobalDairyTrade Auction, ANZ Job Advertisements and the BNZ New Zealand Performance Manufacturing Index on Thursday.