US data out this week may bring NZ exporters some cheer

The strongest determinants of the New Zealand dollar’s immediate future this week will come from data released in the US.

Jobs figures, along with manufacturing and inflation indicators, are the final pieces of information that will feed into the Federal Reserve’s decision on whether to raise interest rates or not.

If it does raise rates, that’s likely to be good news for New Zealand exporters because the New Zealand dollar will probably fall.

Expectations the US economy is faring sufficiently well to justify a rate hike is already benefiting local exporters because the kiwi has shed 4.12% against the greenback in May so far.

Market pricing suggests a 30% chance of a Fed rate hike in June and a 53% of a hike in July.

The market is expecting the US economy added about 160,000 jobs in May, about the same as in April, and the unemployment rate to fall to 4.9% from 5%.

“For currency watchers and exporters, quite a lot to look out for this week out of the US,” says the head of wealth research at Craigs Investment Partners, Mark Lister.

Locally last week, Mainfreight’s annual results provided further evidence the New Zealand economy is trucking along quite nicely.

Mainfreight reported a 5.6% rise to $88.2 million in net profit before one-off items for the year ended March and Mr Lister says that was a little ahead of his firm’s expectations.

Second-half recovery
“The business had a very good second half recovery – the first half was a little bit lacklustre, but they really pulled it back in the second half and it’s got some quite good momentum going into the 2017 financial year,” he says.

Geographically, the results were somewhat mixed but the New Zealand results were very, very strong.

Mainfreight shares were the biggest gainers last week, rising 7.8% while the biggest loser was Tower, down 18.2%, after the general insurer reported a widening loss and a near $20 million write-down of its IT systems.

Further evidence that the New Zealand economy is trucking along quite nicely should come this week from ANZ Bank’s monthly survey of business confidence.

Apart from the agricultural sector, expectations are that firms’ own activity expectations will continue to print above the long-term average and that pricing expectations will remain very modest, well below the mid-point of the Reserve Bank’s target range.

The New Zealand share market certainly continues to motor along, the benchmark Top 50 Index hitting a fresh record, taking its gains so far this year to 10.6%.

That’s more than double the 4.15% gain the ASX 200 Index has chalked up this year and the 4.75% gain in the US S&P 500 Index.

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