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Greenback rises in wake of Fed meeting; strong employment growth and higher wages would increase odd of Fed hike

Interest.co.nz News - Tue, 30/08/2016 - 01:57

By Ian Dobbs*:

Commentary emanating out the Jackson Hole Symposium from senior US Fed officials has seen the market move to re-price the odds on a Fed rate hike this year.

Current odds of over 40% for a move in September are nearly double that seen prior to the commentary.

This comes as Fed Chair Janet Yellen spoke of a continued solid performance in the US labour market and an outlook for economic activity and inflation which strengthened the case for an increase in the federal-funds rate.

The comments when combined with those of the Fed’s Fischer have seen support for the greenback rise in the wake of the meeting and puts additional emphasis on this Friday’s Nonfarm payrolls employment release.

Current expectations are for a gain of around 164k jobs in August. Look for stronger than expected jobs growth and higher wages to tip the odds firmly in favour of a move as early as next month.

Major Announcements last week:

  • Japanese Nikkei Manufacturing PMI, 49.9 vs 49.3 prior (Aug.)
  • EU Markit Manufacturing PMI, 51.8 vs. 52.0 exp. (Aug.)
  • US New Home Sales Change, 12.4% m/m vs. -2.0% exp. (Jul.)
  • NZ Trade Balance, -433M m/m vs. -320M exp. (Jul.)
  • Australian Q2 Construction Work Done, -3.7% vs. -1.9% exp.
  • German IFO - Business Climate, 106.2 vs. 108.5 exp. (Aug.)
  • US Durable Goods Orders, 4.4% vs. 3.5% exp. (Jul.)
  • US Markit Services PMI, 50.9 vs. 52.0 exp. (Aug.)
  • Japanese Inflation, -0.4% y/y as exp. (Jul.)
  • UK Q2 GDP (second est.), 0.6% q/q as exp.
  • US Q2 GDP Annualized, 1.1% as exp.

NZD/USD

The New Zealand dollar has eased against the greenback following the comments on US rates from senior Fed officials at the weekend in Jackson Hole. Support at the .7200/10 area has held the sell-off so far in the wake of USD buying as expectations for a Fed move as early as next month nearly doubled to ~42%. Focus for this week is on Friday’s US employment data which will be critical to next month’s Fed decision. Look for resistance from Friday’s highs near .7380 to cap rallies over the days ahead whilst on the downside a break of .7200 brings more important support in the .7080/.7100 area into focus. We favour marginally selling around .7260/70 prior to Friday’s data.

DIRECT FX Current level Support Resistance Last wk range NZD / USD 0.7253 0.7200 0.7380 0.7211 - 0.7376

NZD/AUD (AUD/NZD)

The New Zealand dollar is trading unchanged against the Australian dollar since Friday’s report. The lack of volatility was to be expected given the USD Jackson Hole focus and lack of important data from either country. This week look’s to lack data which should move the cross materially in either direction, although for now we favour the NZ dollar downside based on the waning upside momentum. Indicators of interest start with Australian building approvals numbers this afternoon. Australian retail sales on Thursday should offer up some volatility, although on balance liquidity over the US data on Friday may offer the best chance of a more sizeable move.

DIRECT FX Current level Support Resistance Last wk range NZD / AUD 0.9577 0.9470 0.9615 0.9551 - 0.9620 AUD / NZD 1.0442 1.0400 1.0560 1.0395 - 1.0470

NZD/GBP (GBP/NZD)

The New Zealand dollar is trading at similar levels against the UK pound to those reported on Friday. Some volatility was noted towards the end of the week on the fall-out of the Jackson Hole comments (on the USD) as the GBP continued to remain more relatively in demand than the NZD. This is a natural reaction as the prospect of higher USD rates in the future impacted on the relatively higher yielding NZD. Economic leads for a potential move this week start in the UK on Thursday (Manufacturing PMI) so for now we favour more trade in the .5490-.5570 (1.7953-1.8215) range until then.

DIRECT FX Current level Support Resistance Last wk range NZD / GBP 0.5533 0.5490 0.5570 0.5499 - 0.5573 GBP / NZD 1.8073 1.7953 1.8215 1.7944 - 1.8186

 NZD/CAD

The New Zealand dollar is trading at similar levels against the Canadian dollar to those reported on Friday. Highs near .9480 again capped trade on Friday over the comments on US rates which came from Fed officials at Jackson Hole (USD supportive). Lows around .9380 which were seen early yesterday came as the market absorbed those remarks of the Fed’s Fischer who spoke of Yellen’s comments being consistent with two rate hikes this year (this hurt the high yielders like the NZD more so than the likes of the CAD). Focus for this week will be on the energy markets and Canadian GDP numbers on Wednesday. For now we favour more trade within those ranges seen last week.

DIRECT FX Current level Support Resistance Last wk range NZD / CAD 0.9438 0.9380 0.9480 0.9377 - 0.9480

NZD/EURO (EURO/NZD)

The New Zealand dollar is trading at similar levels against the Euro to those reported on Friday. Some volatility has been noted within a .6440-.6520 (1.5528-1.5337) range which has been noted since the USD supportive comments on US rates which came out of Jackson Hole. We maintain a marginal NZD upside bias for now given the ECB’s confirmed signalling of an easing bias at the weekend’s meeting, although this week’s data looks unlikely to be able to drive the cross materially in either direction. So we favour .6400-.6550 (1.5625-1.5267) at a stretch on the week.

DIRECT FX Current level Support Resistance Last wk range NZD / EUR 0.6483 0.6360 0.6520 0.6434 - 0.6524 EUR / NZD 1.5424 1.5337 1.5723 1.5327 - 1.5542

NZD/YEN

The New Zealand dollar has lifted in trade against the Japanese Yen since our report on Friday. The move comes on the back of comments at the Jackson Hole meeting of economic leaders which saw the BoJ Governor Kuroda emphasise his commitment in boosting monetary stimulus if required. This saw the Yen come under further pressure following those comments of Fed officials on US rates (which were seen as USD supportive). Data this week looks unlikely to play a large part in the direction of this cross, although Wednesday’s Japanese industrial production numbers may provide a passing interest. We have a marginal NZD upside bias for now.

DIRECT FX Current level Support Resistance Last wk range NZD / YEN 73.87 72.20 74.30 72.93 - 74.14

AUD/USD

The Australian dollar has eased in trade against the greenback since our report on Friday. The move comes on the back of the comments which came from senior US Fed officials at the Jackson Hole meeting over the weekend. These saw the markets increase the odds for Fed rate hikes this year. The comments, particularly those of the Fed’s Fischer (who spoke of Yellen’s comments being consistent with two rate hikes in 2016), focuses’ attention on this Friday’s US employment data which looks likely to cement a September hike should it once again exceed expectations. We favour selling rallies, although resistance nearer .7700 should not be challenged ahead of Friday’s commentary.

DIRECT FX Current level Support Resistance Last wk range AUD / USD 0.7569 0.7520 0.7700 0.7526 - 0.7689

AUD/GBP (GBP/AUD) 

The Australian dollar is trading at levels similar to those reported on Friday against the UK pound. Some volatility was seen on Friday during the comments which came from senior US Fed officials which initially saw the USD ease (Yellen comments), and then rally sharply (Fed’s Fischer comments). The prospect of higher USD rates hit relatively high yielders like the AUD harder than the GBP, and this effect saw the cross trade to AUD lows near .5730 (1.7452 highs). We have little bias this week and expect only moderate moves ahead of Friday’s US Nonfarm payrolls employment data.

DIRECT FX Current level Support Resistance Last wk range AUD / GBP 0.5774 0.5625 0.5810 0.5738 - 0.5815 GBP / AUD 1.7318 1.7212 1.7778 1.7198 - 1.7427

AUD/EURO (EURO/AUD)

The Australian dollar is trading marginally higher against the Euro since our report on Friday. Most of the volatility seen in the interim occurred during the comments from the senior US Fed officials who spoke at Jackson Hole over the weekend (and Friday). For now support around .6710 (1.4903 resistance) has again held well following those comments from the Fed’s Fischer. These lent support to the USD (and reduced the appeal of high yielders like the AUD as the market increased the odds on Fed rate hikes). Data from neither region looks likely to drive the cross materially in one direction this week, although fallout from Friday’s US employment data has the potential to change that view.

DIRECT FX Current level Support Resistance Last wk range AUD / EUR 0.6766 0.6710 0.6820 0.6722 - 0.6803 EUR / AUD 1.4780 1.4663 1.4903 1.4700 - 1.4876

AUD/YEN

The Australian dollar has rallied against the Japanese Yen since our report on Friday. The move comes on the back of the relative underperformance in the Yen in the wake of the comments which came out of Jackson Hole at the weekend. Both currencies have weakened against the greenback, although BoJ Governor Kuroda’s commitment to further easing in commentary at Jackson Hole (if required) has placed additional pressure on the Yen. Look to Friday’s US employment data for a pickup in volatility in the cross. For now we continue to see a break of 76.00 being required to renew the downside pressure.

DIRECT FX Current level Support Resistance Last wk range AUD / YEN 77.09 76.10 78.65 76.11 - 77.41

AUD/CAD

The Australian dollar is trading unchanged against the Canadian dollar since our commentary on Friday. Some volatility has been noted in the interim however, on the back of relative moves in the AUD which reflected the markets change in USD sentiment (and the appeal of high yielders) after the speeches by the Fed’s Yellen and Fischer. Canadian GDP data on Wednesday looks to be the most high impact release coming from either country this week, although we expect the cross to remain with ~.9800-.9890 until Friday’s US employment data.

DIRECT FX Current level Support Resistance Last wk range AUD / CAD 0.9850 0.9800 0.9890 0.9800 - 0.9883

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Market commentary:

Commentary emanating out the Jackson Hole Symposium from senior US Fed officials has seen the market move to re-price the odds on a Fed rate hike this year. Current odds of over 40% for a move in September are nearly double that seen prior to the commentary. This comes as Fed Chair Janet Yellen spoke of a continued solid performance in the US labour market and an outlook for economic activity and inflation which strengthened the case for an increase in the federal-funds rate. The comments when combined with those of the Fed’s Fischer have seen support for the greenback rise in the wake of the meeting and puts additional emphasis on this Friday’s Nonfarm payrolls employment release. Current expectations are for a gain of around 164k jobs in August. Look for stronger than expected jobs growth and higher wages to tip the odds firmly in favour of a move as early as next month.

Australia

Last week was a quiet one in Australia that saw investors holding out for direction from the weekend’s Jackson Hole meeting of economic leaders. This saw US Fed leaders note the strengthening case for an increase in the Fed funds rate, perhaps up to twice in 2016 based on the remarks from the Fed Vice Chair Fischer as he noted Janet Yellen’s earlier hawkish speech. Events in Australia last week included data on construction activity which fell by more than expected in the June quarter. This came as the sharp slump in mining related engineering activity once again weighed. The data shows engineering construction work has now fallen back to near its long term trend which indicates that the winding down in the mining investment boom is nearing completion and should be less of a drag on growth in 2017. Data on skilled vacancies showed a slowing again in July which points to slowing jobs growth, whilst numbers on consumer confidence which hit three year highs indicates robust consumer spending currently. Look for data on building approvals today which should spark more interest than yesterday’s volatile HIA new home sales indicator which slumped 9.7% in July.

New Zealand

Headlines out of the Jackson Hole Economic Symposium over the weekend have dominated trade in the currency markets since our last commentary. Comments from Fed Chair Janet Yellen included one that noted the continued solid performance of the US labour market and the Fed outlook for economic activity and inflation which had strengthened the case for a rate rise in recent months. It wasn’t until further comments from Fed Vice Chair Fischer however, who noted that Yellen’s comments were consistent with two rate increases this year, which finally saw the greenback rally strongly as the market re-priced the odds of 2016 rate hikes. Last week in NZ was a very quiet one for local leads which included a lift in the latest forecast dairy payout from Fonterra and trade numbers for July which revealed a moderately largely than expected trade deficit. Building consents data for July released this morning fell 10.5% m/m from June, although the volatile series had no impact on trade.

United States

Trade in the US last week was dominated by the sharp rally that was seen in the greenback after the comments that came out the Jackson Hole Economic Symposium. These included remarks from Fed Chair Yellen which pointed to the strengthening case for rates hikes given the recent months indicators, including those of the labour market. Initial reaction to the comments was muted given the lack of indication on timing and the range of rate forecast possibilities (to 2018) which were presented to the market. Later comments from the Fed Vice Chair Fischer bolstered rate hike expectations for 2016 after he spoke of Yellen’s comments being consistent with two rate increases this year. Key data last week from the US was mixed, although positive on balance.  Data included new home sales which grew at the fastest rate since 2007 and existing home sales which fell 3.2% in July, far greater than the 0.4% decline expected. Data on manufacturing included a weak Richmond and Kansas Fed and fall in the Markit PMI. Durable goods orders were seen beating expectations, whilst US Q2 GDP was revised down a tenth to 1.1% (annualized)- although contained detail which was more upbeat. Data released already this week has included numbers on personal income and spending for July which showed signs of positive momentum for Q3. Focus for this week is on Friday’s Nonfarm payrolls employment data which will take on additional importance in light of Yellen’s comments at the weekend.

Europe

Commentary coming out of the weekend’s meeting of key economic and central bank leaders at Jackson Hole has dominated trade since Friday. Those of the US Fed were watched keenly for any sign of thinking on the US economy and US rates moving forward. Investors weren’t disappointed after both the Fed Chair Yellen and Vice Chair Fischer talked about the strengthening case for US rate hikes. This saw the USD move higher especially after those of Fischer, who unlike Yellen prior, had noted an element of timing in his interview (he noted that Ms. Yellen’s comments were consistent with two hikes this year). Comments from ECB Executive Board member Coeure which reinforced the current ECB easing bias highlights the diverging policy themes which are emanating from the Fed and ECB. Data last week included various PMI indicators from across Europe. The Services reads were seen remaining firm, although the manufacturing PMIs displayed some weakness in the euro-zone and the economic heavyweights, France and Germany. Other data included numbers out of Germany included the second quarter’s final GDP data which showed growth of 1.8% y/y (work-day adjusted) and the IFO business confidence series which posted its largest decline in four years. Data of interest this week includes regional inflation prints and updates on last week’s manufacturing PMI reads.

United Kingdom

The holiday shortened week has started quietly in the UK which has seen the focus come from the more bullish USD sentiment which had spiked following the comments from US Fed officials (which lifted pricing for US rate hikes this year) at Jackson Hole over the weekend. UK data last week provided little direction for the GBP given its low impact nature, particularly so after the second estimate of Q2 GDP remained unchanged on Friday which was as expected. Other indicators released during the week included numbers on the second quarter’s business investment which beat expectations by rising 0.5% (q/q), and CBI Industrial Trends Orders which highlighted export orders that have reached two year highs. Data on BBA mortgage approvals showed a small decline on the month prior, although remained healthy. The CBI Distributive Trades Survey noted an expansion in retail sales volume in the year to August. Items of interest this week starts with data on consumer credit and mortgage lending/approvals today which will be followed by Nationwide House Prices and GfK Consumer Confidence tomorrow. Key releases for the week will be Thursday’s Manufacturing PMI indicator and Friday’s Construction PMI.

Japan

Trade in the Yen like the other major currencies covered was heavily influenced by the headlines coming out over the weekend at Jackson Hole. These included ones from Fed Chair Yellen which spoke of the strengthening case over recent months for Fed rate hikes and those of the Fed’s Fischer which noted Yellen’s comments as being consistent with a case for two hikes this year. The latter comments have bolstered recent support for the greenback. Comments from BoJ Governor Kuroda, who also attended the Jackson Hole meeting, spoke of the willingness to boost monetary stimulus if needed and the space for further easing via asset buying, monetary base guidance and negative interest rates. Kuroda’s comments underline his commitment to current stimulus efforts despite the growing doubts over its effectiveness. This comes as the BoJ is presently engaged in a review of its monetary policy settings which is due to be completed next month. Data from Japan last week included a rise manufacturing sector output and numbers on inflation which highlighted the current poor inflationary environment being targeted by the central bank. Data released this morning showed both unemployment and household spending beating expectations, whilst other local focus will be on industrial production numbers tomorrow.

Canada

The Canadian dollar has eased in recent trade against the greenback after the USD bullish comments out of Jackson Hole’s meeting of economic leaders and oil prices fell nearly 2% on Monday. The oil price decline was on the back of numbers which showed crude production surging in the Middle East. Local economic leads had little impact on trade last week given their low impact nature. Wholesale sales, which rose in June beat expectations and were helped by strength in autos, whilst local corporate profits for Q2 were seen dropping to their lowest levels since 2010, were impacted by falling profits amongst insurance carriers in the finance sector. Data this week starts with the Q2 current account and numbers on raw material and industrial product pricing today, GDP on Wednesday, manufacturing on Thursday and trade and labour productivity on Friday.

Daily exchange rates 536) { var b = arr.length - 536; // to get last 36 points } else if (arr.length < 536) { var b = 537 - arr.length; } else if(arr.length == 536) { var b=2; } // to generate the format for date representation in x axis var timestamweek = 604800000; var timestamday = 86400000; var timestammonth30 = 2592000000; var timestammonth31 = 2678400000; var timestamyear = 31536000000; var timestamquarterly = 7776000000; for (var u=0;u<2;u++) { arr[u] = parseLineCSV(arr[u]); fomat= String(arr[u][0]); var k=0; do { k++; } while(fomat.charAt(k)!="-") var k1 =k; do { k++; } while(fomat.charAt(k)!="-") var k2=k; do { k++; } while(k c_year) { var yy = "19"+fomat.substring(k2+1,k3+1); } else if(c_data == c_year) { var yy = "20"+fomat.substring(k2+1,k3+1); } // conversion of months into numerical form //+++++++++++++++++++++++++++++++++++ if (mm == "Jan") { mm= "01"; } else if (mm == "Feb") { mm= "02"; } else if (mm == "Mar") { mm= "03"; } else if (mm == "Apr") { mm= "04"; } else if (mm == "May") { mm= "05"; } else if (mm == "Jun") { mm= "06"; } else if (mm == "Jul") { mm= "07"; } else if (mm == "Aug") { mm= "08"; } else if (mm == "Sep") { mm= "09"; } else if (mm == "Oct") { mm= "10"; } else if (mm == "Nov") { mm= "11"; } else if (mm == "Dec") { mm= "12"; } // +++++++++++++++++++++++++++++++++++++++++++++++++++++++ var date = mm+"/"+dd+"/"+yy; var timestam_1 = Date.parse(date); var timestam= timestam_1+86400000; //86400000 added to get correct timezone output from Date.parse var time4 = new Date(timestam); var Weeko = time4.getDay(); var dd2 = time4.getDate(); var mm2 = time4.getMonth(); var flag_y=arr[i][1]; var ahref_title="Click here for full story"; if(arr[i][2]) { var url=arr[i][2]; var flag_date='{"x":'+timestam+', "title":"  ","text":"Click here for Story!"}'; flagAr[csvgen_counter].push(flag_date); } var yy2 = time4.getFullYear(); var yy3 = yy2+""; var yy4= yy3.substring(2,4); //++++++++++++++++++++++++this for days conversion++++++++++++++++++++++++++++ if (Weeko==1) { Weeko = "Mon"; } else if (Weeko==2) { Weeko = "Tue"; } else if (Weeko==3) { Weeko = "Wed"; } else if (Weeko==4) { Weeko = "Thu"; } else if (Weeko==5) { Weeko = "Fri"; } else if (Weeko==6) { Weeko = "Sat"; } else if (Weeko==0) { Weeko = "Sun"; } //+++++++++++++++++++++++this is for month conversion+++++ if (mm2==0) { mm2 = "Jan"; } else if (mm2==1) { mm2 = "Feb"; } else if (mm2==2) { mm2 = "Mar"; } else if (mm2==3) { mm2 = "Apr"; } else if (mm2==4) { mm2 = "May"; } else if (mm2==5) { mm2 = "Jun"; } else if (mm2==6) { mm2 = "Jul"; } else if (mm2==7) { mm2 = "Aug"; } else if (mm2==8) { mm2 = "Sep"; } else if (mm2==9) { mm2 = "Oct"; } else if (mm2==10) { mm2 = "Nov"; } else if (mm2==11) { mm2 = "Dec"; } //++++++++++++++++++++++++++++++++++++++++ //weekly if ( timestamvar == timestamweek) { fomat2=dd2+"-"+mm2+"-"+yy4; padding_value=timestamweek; range_selector=2; } // Daily else if ( timestamvar < timestamweek) { fomat2=dd2+"-"+mm2+"-"+yy4; padding_value=timestamday; range_selector=2; } // Yearly else if ( timestamvar >= timestamyear) { fomat2=mm2+"-"+yy4; padding_value=timestamyear; range_selector=3; } //monthly else if ((timestamvar <= timestammonth30)&&(timestamvar <= timestammonth31)) { fomat2=mm2+"-"+yy4; padding_value=timestammonth30; range_selector=2; } // Quarterly else if (timestamvar >= timestamquarterly) { fomat2=mm2+"-"+yy4; padding_value=timestamquarterly; range_selector=3; } else { fomat2=dd2+"-"+mm2+"-"+yy4; padding_value=timestamday; range_selector=3; } arr[i][0]= fomat2; var decpad; decpad = parseFloat(arr[i][1]); arr[i][1] = decpad; if(i==(arr.length-1)) { // Functionality to get the last value var xvalu=dd2+"-"+mm2+"-"+yy4; var yvalu= String(arr[i][1]); var xyvalu="Latest value at "+xvalu+" is "+yvalu; updt="Updated on "+xvalu; } tempAr.push(timestam); if(!arr[i][1]) { arr[i][1]=null; } yaxisAr[csvgen_counter].push(arr[i][1]); // tempAr1.push(timestam); // tempAr2.push(tempAr1); tempAr.push(arr[i][1]); last_val=timestam; finalAr[csvgen_counter].push(tempAr); } xpad=last_val+padding_value; //*****************to end up graph early////// if(arr[i]== "") { vi=arr.length-i; arr.length=arr.length-vi; i=arr.length-1; fomat = replic; var k=0; do { k++; } while(fomat.charAt(k)!="-") var k1 =k; do { k++; } while(fomat.charAt(k)!="-") var k2=k; do { k++; } while(k= timestamyear) { fomat2=mm2+"-"+yy4; } //monthly else if ((timestamvar <= timestammonth30)&&(timestamvar <= timestammonth31)) { fomat2=mm2+"-"+yy4; } // Quarterly else if (timestamvar >= timestamquarterly) { fomat2=mm2+"-"+yy4; } arr[i][0]= fomat2; var decpad; decpad = parseFloat(arr[i][1]); //arr[i][1] = roundVal(decpad); arr[i][1] = decpad; if(i==(arr.length-1)) { var xvalu=dd2+"-"+mm2+"-"+yy4; var yvalu= String(arr[i][1]); var xyvalu="Latest value at "+xvalu+" is "+yvalu; updt="Updated on "+xvalu; } } } } //other required functions //chart configuration starts here function getXMLHttpRequest(file) { //var arrSignatures = ["MSXML2.XMLHTTP.5.0", "MSXML2.XMLHTTP.4.0", //"MSXML2.XMLHTTP.3.0", "MSXML2.XMLHTTP", //"Microsoft.XMLHTTP"]; //for (var i=0; i < arrSignatures.length; i++) { try { var xmlhttp = new window.XMLHttpRequest(); xmlhttp.open("POST",file,false); return xmlhttp; } catch(e) { error=e.message; } //} throw new Error("MSXML is not installed on your system."); } function readCSV(locfile) { // load a whole csv file, and then split it line by line var req = new getXMLHttpRequest(locfile); //req.open("POST",locfile,false); req.send(""); return req.responseText.split(/\n/g); } function parseLineCSV(lineCSV) { // parse csv line by line into array var CSV = new Array(); lineCSV = lineCSV.replace(/,/g," ,"); lineCSV = lineCSV.split(/,/g); // This is continuing of 'split' issue in IE // remove all trailing space in each field for (var i=0;i=0) { for (var j=fstart+1;j<=i;j++) { lineCSV[fstart]=lineCSV[fstart]+","+lineCSV[j]; lineCSV[j]="-DELETED-"; } fstart=-1; } } fstart = (lineCSV[i].match(/^"/)) ? i : fstart; } var j=0; for (var i=0;i Charts loading...Charts loading...Charts loading...Charts loading...Charts loading...Charts loading...Charts loading...

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Ian Dobbs is a currency analyst with Direct FX You can contact him here »

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Reserve Bank official says New Zealand unlikely to see zero interest rates

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The Reserve Bank's head of economics has not ruled out the official cash rate (OCR) falling to zero "but I don't think we're going to get there".
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Shenzhen's start up scene: from ski sensors to worm farms

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European recognition of FMA oversight of auditors

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American Airlines boss moves to rival United

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Marketing key to Spark's broadband revival

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Migrant worker awarded $43,000

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International eyes on NZ Fashion Week

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Land a Major Driver of Property Prices, But Housing Gets the Highlights - Nasdaq

Google NZ House Prices - Tue, 30/08/2016 - 01:22

Nasdaq

Land a Major Driver of Property Prices, But Housing Gets the Highlights
Nasdaq
This suggests that houses in New York and San Francisco cost miles above the country average, which illustrates the significance of location when it comes to house prices. Interestingly, when you try to look up listings of land for sale in North ...

NZOG to offer 40M share buyback

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NZOG to offer 40M share buyback

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What you need to do ensure your car insurer pays out when you need them to

Interest.co.nz News - Tue, 30/08/2016 - 01:09
Image sourced from Shutterstock.com

Picture this: You’re just about to embark on a drive between Napier and Gisborne. You have a half a pint of beer and a meal before setting off on your journey.

You have a crash.

When lodging a claim with your insurer, they ask whether you had any alcohol in the 24 hours prior to the accident. You say no.

You figure half a pint of beer with food is insignificant in the scheme of things and wouldn’t have affected your driving. Why ring the alarm bells unnecessarily right?

Next thing you know it, your insurer gets an investigator on board and finds out you lied, so declines your claim.

‘That’s not fair’, you argue. You believe you would’ve been well within the legal alcohol limit and your insurer can’t prove the alcohol caused the accident.

This is a complaint that has been brought before the Insurance and Financial Services Ombudsman (IFSO).

Yet the IFSO has declined it, ruling that regardless of whether the alcohol did or didn’t have a bearing on the accident, it was essential for the insurer to know whether it had been consumed at all, for it to accurately assess the claim.

The fact the driver provided a “substantially incorrect and material” statement, was enough for the claim to be declined.

It wasn’t the alcohol that saw the claim declined, but the fact it wasn’t disclosed.

Be straight-up and disclose every detail

So what’s the moral of the story? Be honest and disclose everything to your insurer - no matter how irrelevant you think the information is.  

The IFSO says 68% of the complaint inquiries it received in the 2015 financial year were related to fire and general insurance claims. Of these, the highest number related to motor vehicle insurance, very closely followed by house insurance.

While it’s important to make sure you choose the right insurance policy from the get-go, it’s arguably more important you do what you have to, to uphold your side of the contract, so that your insurer pays out when you need it to.

Here is what the IFSO suggests you do to avoid the traps those with car insurance commonly get caught out by.

Ensure you understand the difference between ‘agreed value’ and ‘market value’

The IFSO has declined a complaint from someone who misunderstood the details of their policy, and couldn’t prove whether they had been given false information about the policy by their insurer as this wasn’t documented.

The policyholder thought they had an ‘agreed value’ policy, yet actually had a ‘market value’ policy. This meant that in the event of a total loss, they’d be paid the sum insured as stated on the policy schedule, or the market value of the vehicle before theft, whichever was the lesser of the amounts.

Their car was subsequently stolen.

When it came to claim time, the insurer valued the car at $4000.

Yet the policyholder accused the insurer of misrepresenting the type of cover under the policy when it was arranged.

They also disputed the insurer’s valuations, on the basis that they relied on incorrect information about the state of the vehicle prior to the theft.

All up, they wanted $6000.

Yet the IFSO backed the insurer, as its valuation was in line with its policy document.

While the phone calls the policyholder had with the insurer on taking out the policy hadn’t been recorded, these wouldn’t have held any ground anyway, as the IFSO can’t consider issues raised by oral evidence.

The case underlines the importance of reading and understanding your policy document, as this, rather than any conversations you may have with your insurer, is what’s binding and counts.

Ensure your kids stick to the rules of their licences

The IFSO has recently also declined a complaint from a couple whose insurer refused to pay a claim after their son crashed their car.

The young man bumped into the back of a car which had slowed down. He had looked down to turn up the volume on the radio, and didn’t have enough time to hit the brakes to avoid bumping the car in front of him.

The policy was declined on the basis the man was carrying an unauthorised passenger while driving on his restricted licence.

The policyholders argued the breach didn’t cause or contribute towards the accident, but the IFSO said that had a suitably qualified person been in the car too, they may have helped prevent the accident by pointing out the car ahead had stopped and advising the driver to slow down for example.

Ensure you stick to the rules of your licence

The same principle applies to you. The IFSO has declined a complaint by a person whose insurer denied their claim on the basis they drove with breath alcohol above the legal limit.

The driver had a breath alcohol reading of 284 micrograms of alcohol per litre of breath - 34 micrograms above the 250 limit at the time of the incident.

He argued alcohol didn’t contribute to the accident, citing a police report which neither confirmed nor denied this had contributed to the accident.

But at the end of the day, he was driving unlawfully, so wasn’t covered.

For more car insurance tips and case studies, see the IFSO’s website.

Categories: Economic News
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