Daily Economic Commentary: New Zealand

[PipDiddy]

"Whee!" yelled the Kiwi as it soared higher and higher against the greenback yesterday, propelled by an improvement in risk sentiment. New Zealand's stronger than expected trade balance figures even gave the Kiwi an additional boost.

New Zealand's trade surplus grew from 590 million NZD to 656 million NZD in April, allowing its annual trade balance to turn positive for the first time since 2002. April's trade balance figure beat the consensus of 455 million NZD as exports grew strongly that month.

No other economic reports are due from New Zealand today so keep your eyes and ears open for other events that could impact risk sentiment and affect the Kiwi's movement.

[PipDiddy]

The Kiwi went on a roller-coaster ride against its US counterpart last week. Market volatility sent the NZDUSD plunging down to the week’s low at 0.6562 before skyrocketing to close the week at 0.6789.

As we saw in the Kiwi’s movement last week, shifts in risk sentiment has been the main driver of the FX market as of late. The Kiwi rose on increased risk appetite last Thursday, but dropped on Friday as commodities and equities took a small hit.

Earlier today, the NBNZ business confidence survey was released. The report, which measures how confident manufacturers, builders, service providers and retailers are about the state of the economy, printed a reading of 48.2, slightly lower than the previous month’s score of 49.5. Could this be an adverse effect of recent debt contagion fears?

[PipDiddy]

The Kiwis may be confident, but the skittish market need more convincing as the Kiwi finished slightly lower against the dollar and the yen at 0.6767 and 61.77 respectively despite companies being at their highest spirits since May 1999.

Here's a little more in depth look at the the New Zealand Business Confidence survey released yesterday. The report revealed that 48.2% of the companies expect the general economy to improve, down from the previous 49.5% figure. The overall figure might be a bit of a disappointment, but the survey also showed 45.3% of companies are more confident on their sales and profits, marking the highest percentage in 11 years. This could mean more investments and employment for the economy, creating a pressure for the interest rate to rise.

The Reserve Bank of New Zealand is scheduled to release their monetary policy statement on June 10. Analysts expect the rate to rise by 25 basis points. Will the bank give in to the pressure? We’ll know next week! Meanwhile, let’s watch for the Australia and New Zealand Commodity Prices is published tomorrow at 3:00 am GMT. Since exports make up a significant chunk of New Zealand's economy, an increase in export prices could indicate rising export demand, which would be good for the economy.

[PipDiddy]

The lack of economic reports from New Zealand left the Kiwi with a topsy-turvy performance yesterday. At first, the NZDUSD dived to a low of 0.6703 but pulled up to a high of 0.6837 later on.

Weaker than expected economic reports from Australia, New Zealand's Oceanic buddy, resulted to strong selling pressure for the Kiwi yesterday. Since a huge chunk of New Zealand's economic activity is closely linked to Australia's, negative economic figures from the Land Down Under have an impact on New Zealand.

That means you'll have to keep an eye out for Australia's GDP report due 1:30 am GMT today! If the actual figure beats the consensus of 0.6% growth for the first quarter, the Kiwi could join the Aussie in rallying.

[PipDiddy]

The Kiwi sparkled in yesterday's trading session, as it got a nice boost from a return of risk appetite in the commodities markets. The NZDUSD closed 62 pips higher to end the day at 0.6822.

Prime Minister John Key made some interesting comments that hit the airwaves yesterday, as he said that the Kiwi would continue to lag behind the Aussie in terms of performance, as carry trade will continue to drive the Aussie higher. In addition, he doesn't expected that the RBNZ will be raising interest rates any time soon. Well, seeing as how both the RBA and BOC haven risen rates already, could the RBNZ give in to peer pressure? Only time will tell!

No major data was released from New Zealand yesterday, but as always, Kiwi trading was driven by shifts in risk sentiment. A pick up in equities and commodities markets helped push the com-dolls higher. With no data coming out for the rest of the week, we can expect more of the same.

Let me warn you though, that there's a boat load of high impact reports docking in from the US over the next couple of days. The non farm payrolls employment report normally causes a lot of choppy movement, so make sure you've got your lifevests on and keep those risk management rules in check!

[PipDiddy]

With absolutely nothing on New Zealand’s economic calendar, the Kiwi was left victim to risk sentiment. Although the Kiwi able to rally on increased risk appetite early on, it was undermined by the dollar’s safe-haven appeal once the European trading session kicked in. It went as high as .6900 during the Asian session before being taken back down to .6839 at the end of the US session.


No data coming out of New Zealand today, so the Kiwi’s price action will probably be determined by news coming out of other major economies, particularly the US non-farm payrolls report.

[PipDiddy]

The Kiwi's flight was cut short last Friday after weaker than expected US non-farm payrolls figures brought risk aversion back. With no economic figures to draw support from, the Kiwi fell to a low of 0.6684 against the Greenback.

This week is bound to be exciting for the Kiwi as it awaits the RBNZ rate decision on Wednesday. Both its com-doll buddies, the Aussie and the Loonie, have already enjoyed rate hikes from their respective central banks. Would the Kiwi give in to peer pressure and join the rate hike bandwagon? Many are expecting the RBNZ to push their benchmark rate from 2.50% to 2.75% but if the central bank fails to do so, the Kiwi could show its disappointment by sliding even lower.

Today, New Zealand is set to release its quarterly manufacturing sales report. The 0.7% increase seen during the last quarter of 2009 marked the indicator's first positive reading in over a year. Would it be able to sustain its growth for the first quarter of 2010? Stay tuned for the actual figure due 10:45 pm GMT!

[PipDiddy]

The Kiwi lost out in yesterdays trading wars as risk aversion continued to fill the air. Like the Aussie dollar, the Kiwi fell just over 100 pips from its opening price.

With risk aversion continuing to stick around like that old box of pizza left in my fridge, we can probably expect Kiwi trading to be affected by shifts in risk sentiment today. Watch out tomorrow thouh, when the RBNZ will be releasing its interest rate decision. Word is that the RBNZ crew may actually raise rates to 2.75%. Be ready at 9:00 pm GMT when the bank makes releases its statement!

[PipDiddy]

Thanks to the rise in commodity price and the speculation of a rate hike from the Reserve Bank of New Zealand, the Kiwi was able to stage a magnificent rally in yesterday’s trading session. From its Asian session opening price of .6585, the NZDUSD soared almost 100 pips to close the US trading session at .6682.

The spotlight falls on the Reserve Bank of New Zealand today as the bank is scheduled to announce their decision on interest rates later. The bank, which will reveal their verdict at 9:00 pm GMT, is expected to hike rates by 25 basis points to 2.75%. Given the expectation of a rate hike, we could see traders provide the Kiwi with some buying support.

[PipDiddy]

Hooray for New Zealand! The RBNZ hiked rates from 2.5% to 2.75%, giving the Kiwi a strong boost to a high of 0.6748 against the Greenback. That's three out of three for the com-doll gang!

Yesterday, the Kiwi joined its fellow com-dolls (Aussie and Loonie) in enjoying rate hikes from their respective central banks. According to RBNZ policymakers, they might keep raising rates in the coming months as part of their tightening monetary policy moves. Even though this rate hike was probably priced in already, the Kiwi jumped for joy after the rate statement. However, its rally was cut short when the central bank downgraded its growth forecasts for the next couple of years.

New Zealand is planning to take a break from releasing economic reports today but keep your ears open for RBNZ Governor Alan Bollard's speech at 1:10 am GMT. He could shed more light on the central bank's monetary policy decision and possibly give a schedule of their upcoming rate hikes. You don't want to miss out on that, do ya?