Daily Economic Commentary: New Zealand

[PipDiddy]

NZD/USD stalled at the .8200 handle as it formed a doji on the daily chart. After opening at .8186, the pair topped out at .8238, only to come falling back down to .8191 where it ended the day. Have Kiwi bulls finally run out of steam?

That's definitely a possibility! After all, the RBNZ rate decision didn't really give them any fuel to feed the Kiwi rally.

As expected, the central bank left interest rates untouched at 2.5%. Though he'll be stepping down as the central bank head in a couple of weeks, he didn't really leave the markets with a bang as his words were pretty dull and expected.

In his last rate statement as the RBNZ head, Alan Bollard announced that he and his men aren't expecting a spectacular rebound. They only see a modest recovery over the years. He also noted the Kiwi's recent strength and how it poses a threat to the export industry. Another issue of concern was the government's belt-tightening, which has been doing a number on the economy's growth.

Overall, it seems that the RBNZ has tilted slightly towards the dovish end of the spectrum. Now, let's see if this will affect the markets' interest rate expectations and Kiwi price action in the weeks to come!

[PipDiddy]

You didn’t think NZD/USD would stop rising, did yo? Thanks to the Fed’s QE3 announcement, NZD/USD was able to strongly push above the .8300 handle yesterday. This enabled the pair to mark its highest level since March.

In other news, earlier today, the New Zealand Food Price Index was released. It showed that prices rose 0.1% in August, half the increase seen the month prior. Since it was a tier 3 report, it didn’t have much of an impact on NZD/USD.

No red flags on New Zealand’s forex calendar for the rest of the day, but I suspect we’ll still see a lot of action on NZD/USD’s chart. The European traders still haven’t had a chance to react to the Fed’s announcement, so we’ll probably see some volatility come the European trading session.

[PipDiddy]

After soaring to its 5-month highs at .8354 against the dollar, the Kiwi soon found itself flightless in the New York session. NZD/USD then ended the week's trading with a 3-pip loss for Friday at .8299.

The dollar weakness which was sparked by the very dovish FOMC statement allowed the comdoll to rally in the Tokyo and London sessions. However, traders decided to pocket some of their gains before the end of the week and caused the Kiwi its loss.

We also saw the same move on commodities such as oil and gold. Despite ending Friday with gains, both were well off their highs.

Our forex calendar still doesn't have any market-moving report on tap from New Zealand today. This means that we'll probably see market sentiment dictate the Kiwi's price action. With that said, make sure you keep close tabs on the market's mood. Remember that the currency usually rallies when risk appetite is up.

[PipDiddy]

Just like its comdoll siblings, the New Zealand dollar fell victim to the Greenback yesterday. NZD/USD hit a low at .8250 before finally settling at .8261, down 19 pips from its opening price.

A drop in commodities and protests in China against Japan helped contribute to the decline in the New Zealand dollar yesterday. If the Chinese government continues to allow the protests, it could lead to further weakness over the rest of the week.

For today we’ve got the current account lined up at 10:45 pm GMT. Early estimates are calling for a rise in the deficit from 1.31 billion NZD during the 1^st quarter of 2012, to 1.63 billion NZD this past quarter. If the report comes in better than expected and shows a smaller deficit, it could give the New Zealand dollar a nice boost to help it recuperate some of its losses yesterday.

[PipDiddy]

Easy does it! Unlike it's neighbor, the Aussie, the Kiwi was able to score pips against the dollar yesterday. NZD/USD finished the New York session 0.8269 after opening the day at 0.8256.

It looks like the effect of the Fed's very dovish FOMC statement last week continued to prop up the Kiwi. Heck, it was enough for traders to shrug off New Zealand's disappointing current account report. Data showed a bigger deficit of 1.80 billion NZD versus the market's forecast of 1.63 billion NZD for Q2 2012.

I don't think traders could easily ignore the GDP report which will be released later at 11:45 pm though. So make sure you keep tabs on it! The consensus is for the economy to have grown by 0.3%. Should it come better than expected, we could see NZD/USD trade even higher. If not, the Kiwi may just give up ground to the dollar.

[PipDiddy]

NZD/USD’s price action yesterday could be summed up in one word: sideways. The pair opened the Asian trading session at .8274, bounced around a relatively tight 35-pip range, and closed the day barely changed at .8275.

No data was released yesterday. Earlier today, however, the Kiwi received a huge boost from New Zealand’s quarterly GDP report.

The report revealed that the country expanded 0.6% during the 2^nd quarter, higher than the 0.4% growth the market had initially predicted. According to the GDP report, New Zealand’s agriculture and construction industries were the main contributors behind the increase in economic growth. As of this writing, the pair is currently trading a few pips below .8300.

[PipDiddy]

Go Kiwi, go! Among the comdolls, the Kiwi was the only one to end the day higher against the dollar. NZD/USD ended the New York session at .8289 after starting the day at .8267.

Risk aversion had no match for the good vibes brought about by New Zealand's GDP report for Q2 2012. As I said yesterday, the report came in higher at 0.6% versus the 0.4% forecast.

However, with our forex calendar blank for reports from New Zealand today, will the Kiwi be able to extend it's gains?

Hmmm, that will probably depend on market sentiment. Make sure you keep tabs on the market sentiment. Remember that the currency usually trades higher when risk appetite.

[PipDiddy]

Another day, another rejection! Despite its respectable rally from the day prior, the Kiwi was unable to sustain its gains above the .8300 major psychological level due to the absence of a bullish catalyst. It’s currently trading at .8271, almost 60 pips lower from its highest level last Friday.

The only report released last Friday was the Credit Card Spending. It showed that spending rose 1.9%, which was a welcome improvement from the previous month’s flat reading (revised down from 0.1%).

No biggies scheduled for publishing today but on Friday, expect to see the NBNZ Business Confiddence survey. The report is trending downwards, and another decline could end up being bearish for the Kiwi. Last month, the reading was at 19.5.

[PipDiddy]

Geronimooo!!! Though New Zealand’s economic cupboard was as empty as Cyclopip’s plates after dinner, NZD/USD managed to drop by a whopping 79 pips to .8210. What gives?

Well, it certainly doesn’t help that investors were worried about global growth. For one thing, Spain is being pressured to formally ask for a bailout while the euro zone leaders are still butting heads over banking union proposals. And then there are concerns over China’s growth, which had dragged commodity prices and commodity-related currencies yesterday.

Will New Zealand’s trade balance report at 10:45 pm GMT provide any relief for the comdoll? Since trade numbers from Australia, Canada, China, and even Japan have disappointed recently, traders are expecting a 608 million NZD deficit for August, much lower than the 15 million NZD surplus that we saw in July. Still, you should keep a close eye on this one in case we see surprises!

[PipDiddy]

Just when you thought the Kiwi was going to stage a spectacular performance, risk aversion weighs down on it heavily. The Kiwi rose strongly early on yesterday but the rally was extinguished during the U.S. session. It went as high as .8285 only to slide back down and close near its day open price.

Due to the lack of market-moving events in New Zealand, the Kiwi’s price action was mostly the result of the market sentiment. According to news reports, there were rumors that went around that Germany’s Bundesbank was questioning the legality of the ECB’s Outright Money Transactions (OMT) program. If it turns out to be unconstitutional, the ECB might be forced to scrap it.

New Zealand’s economic calendar will be dead again today, but I think the Kiwi will still see a bit of movement. Remember, it’s both the end of the month and the second quarter, which means we could see volatility as traders close out their positions. Be careful out there!