Forecast For AUD, NZD, CAD & ZAR Is Gloomy As Share Markets Wobble

Modified: Monday, 27 May 2013 21:35 BST - Written by Minesh Chaudhari

STORY LINK Forecast For AUD, NZD, CAD & ZAR Is Gloomy As Share Markets Wobble

‘Sell in May and go away, buy again on St. Ledger Day’ – so goes the tried and tested adage from the equities market. As we enter the final week of May, this time-worn saying has rarely seemed more prescient. Last Thursday’s session saw Tokyo’s Nikkei 225, considered by many analysts to be Asia’s premier share index, give up over 7% of its value. Worryingly, Friday’s trading day saw Japan’s benchmark index recover only a slight amount and Monday’s opening session of the week saw the Nikkei close down by 3.22%.

With world share markets having enjoyed a strong bull run since plumbing their post credit crisis lows in 2008, and with global commodities markets showing signs that they are drifting lower, it would appear highly possible that as we hurtle towards the low-volume Summer period, share markets are about to endure a painful correction. The risk-correlated Australian and New Zealand Dollars, along with the commodity-driven Canadian Dollar and South African Rand, are already showing signs of weakening in anticipation of such a move. This has sent the Pound to Australian Dollar exchange rate (currency : GBP AUD) up through the 1.5700 level during yesterday’s trading day, while the Pound to new Zealand Dollar exchange rate (currency : GBP NZD) has briefly traded above the 1.8800 level within the past ten days.

This week’s session brings a raft of tier one risk events which, if they disappoint investors, could accelerate and deepen the flight to safety which has marked share market movement over the past week. Today’s US Consumer Confidence survey for May leads the way, closely followed by tomorrow morning’s latest German unemployment data. With US GDP data penned in for publication on Thursday, it promises to be a market-moving week.

Meanwhile, panning out to the medium term picture, recent commentary suggests that it would appears highly possible that the People’s Bank of China will move to increase its benchmark interest rate as 2013 progresses in an attempt to ensure that price rises in the world’s second largest economy are kept under control. China’s central bankers accept that such a move will dampen activity in the nation’s economy, however they feel that this is a price well worth paying in order to ensure balanced growth. Such a move would be likely to increase selling pressure on AUD, NZD, CAD and ZAR.

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