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Kiwi traders, huddle up! Better take note of these upcoming market catalysts from New Zealand if you’ve got any positions open this week, as forex junkies are trying to gauge when the RBNZ might cut interest rates again. All these events are scheduled during the wee hours of Tuesday’s New York session so brace yourselves for additional NZD volatility then.

1. Global Dairy Trade auction

Because of New Zealand’s huge dependence on milk, butter, cheese, and all things dairy, the biweekly Global Dairy Trade auction tends to dictate Kiwi direction primarily based on the dairy price index. This index reflects the change in average prices of dairy products included in the auction, giving traders an idea of how the country’s trade revenues might turn out and how these could affect farmers’ incomes.

If you still don’t believe that dairy makes the Kiwi’s world go ’round, then lemme tell you that these products account for roughly 30% of New Zealand’s exports, which then makes up nearly a third of the country’s overall GDP. Because of that, rising dairy prices usually lead to NZD appreciation while falling prices tend to yield Kiwi losses.

Table from Global Dairy Trade
Table from Global Dairy Trade website

In the previous GDT auction, the dairy index posted a strong 6.6% jump after staying flat during the earlier instance, leading most market participants to anticipate a rebound in the industry. Another impressive reading this week could reinforce expectations of higher trade revenues and growth figures while a sharp decline in prices could lead to a weaker outlook.

2. Quarterly employment report

In our School of Pipsology lesson on Fundamental Analysis, we’ve discussed how employment figures tend to be leading indicators of spending and growth since stable jobs and income boost consumer confidence. Most major economies provide a glimpse of their labor market performance each month but New Zealand prints its jobs figures just once every quarter, which gives it a much stronger impact on NZD price action.

For the first quarter of 2016, New Zealand showed a stronger than expected 1.2% increase in hiring, twice as much as the projected 0.6% uptick. However, the labor force also experienced a big bump up during the period as the working-age population grew, resulting to an increase in the unemployment rate from 5.4% to 5.7%. Still, annual wage inflation was up 1.6% on higher incomes from both public and private employers.

For the second quarter of the year, employment is expected to have increased by only 0.6% while the unemployment rate is expected to have fallen from 5.7% to 5.3% as the previous quarter’s slack may have been absorbed. If not, Kiwi traders could chalk this up as a reason for the RBNZ to lower interest rates once more, likely sending the currency lower across the board. Keep in mind, however, that the last two quarterly employment change figures have surpassed expectations.

3. Quarterly PPI data

Last but certainly not least is New Zealand’s PPI readings, which serve as leading indicators for consumer inflation. Producer input and output prices have churned out negative readings for back-to-back quarters, causing the economy’s Q2 CPI to fall short of expectations and fuel RBNZ rate cut speculations.

Another round of negative PPI readings could keep expectations running for more RBNZ interest rate cuts this year, especially since RBNZ Governor Wheeler and his fellow policymakers are already worried about inflation. Wheeler has blamed the slump in tradables inflation on the strong Kiwi, reiterating that a decline in the exchange rate is needed. And even though the RBNZ’s bark may be worse than its bite when it comes to currency intervention, falling producer prices could still result to more jawboning from central bank officials.

The bottomline is that it’s crucial to remember that the RBNZ’s accommodative monetary policy bias serves as the main backdrop for all these top-tier reports, with any hint of economic weakness likely to increase the odds of another 0.25% cut in their meeting next month. To downplay rate cut hopes, the actual readings would have to come in way better than expected and this doesn’t seem like an easy feat.