This week’s economic calendar is unlikely to offer much support to the beleaguered Kiwi dollar. Second-quarter Producer Prices will most probably tick higher as the data will not take into account July’s sharp downward correction in crude oil. The same considerations will guide the Retail Sales figure: receipts fell to the lowest level since 1997 in the first quarter and are likely to deteriorate further before cheaper oil and easing borrowing costs show up in the data for the three months to September.
[B]New Zealand Fundamentals Yield To US Dollar Sentiment
Fundamental Outlook for New Zealand Dollar: Bearish[/B]
- New Zealand’s Employment Change surprises sharply to the upside, tops second-quarter expectations by 1%
- The ANZ Commodity Price Index improved to print at 1.8% in July, the highest in three months
This week’s economic calendar is unlikely to offer much support to the beleaguered Kiwi dollar. Second-quarter Producer Prices will most probably tick higher as the data will not take into account July’s sharp downward correction in crude oil. The same considerations will guide the Retail Sales figure: receipts fell to the lowest level since 1997 in the first quarter and are likely to deteriorate further before cheaper oil and easing borrowing costs show up in the data for the three months to September.
Business NZ’s Purchasing Manager Index sank to the lowest levels since 2005 in June, with no substantial changes in underlying conditions to offer an improvement in July. Consumers are likely to lead businesses in offering a favorable response to falling energy costs: prices at the gas pump are more flexible than those faced by firms as they typically try to hedge against significant changes in production costs by locking in prices months in advance.
On balance, NZDUSD price action is likely to see a similar dynamic to that discussed above for the Aussie dollar. The Kiwi led most other pairs in its decline against the greenback and may do so again for the eventual correction. While the underlying fundamentals a positioned for the smaller antipodean currency to continue its decline, a bout of profit-taking on US dollar long positions is likely to see NZDUSD move higher in the near term before returning to trade with the overall bearish trend. - IS
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