In recent weeks, data supporting a rate drop, such as a slowing housing market and economy, low business confidence, weak consumer spending, low inflationary figures, slightly higher unemployment.  However these releases have been mild and the RBNZ may not want to jump the gun in beginning to come away from the high interest rate that has been helping to keep the kiwi afloat.  A rate drop is not necessary and therefore the 7.25 percent should live until at least the second half of 2006.  In anticipation of the announcement, the kiwi will most likely be guided by the unsteady commodity market prices and the weaker US dollar news.  With the interest rates looking to stay at the current high level, the high differential should hold and buoy the kiwi through the week.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Last week saw a data drought in <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />New Zealand.  On Monday, the M3 money supply was released for April.  The money supply grew 10.3 percent, 1.2 percent more than expected.  The kiwi remained steady after this release, which could signal that a rate drop is on the table for the RBNZ.  The markets seemed to need time and more information in order to be convinced however.  The next day NBNZ business confidence was released as having remained low in May although rising slightly from Aprils reading to a negative 31.3 percent.  Inflationary worries and high oil prices seem to be weighing on the sentiment of business owners and inhibiting investment.  Build permit approvals for April were released on Wednesday posting a fall of 6 percent, after Marchs fall of 14.1 percent, to the lowest level in a year.  This is a sign that the RBNZ was waiting for to prove that the overheated housing market has finally cooled down and booming economic growth is beginning to slow.  The kiwi strengthened on the news as the slow down fueled speculation of a rate drop.  With no news for the rest of the week, the kiwi was driven on Wednesday by US dollar positive news, pulling the currency back down to slightly lower levels seen the previous Friday.