New Zealand is set to print its GDP report! Will that be enough for the Kiwi to dance to its own beat this week?
Let’s take a look at this week’s potential catalysts:
GDP report (June 20, 10:45 pm GMT)
Back in March we saw New Zealand’s GDP print a 0.6% gain when analysts had expected a 0.7% growth.
Turns out, manufacturing dipped by 0.1% after rising by 0.7% while construction also lost momentum in Q4 2017.
Though the actual reading wasn’t too far from estimates, it was enough to spook the Kiwi bulls, at least for a while. The comdoll managed to regain its post-event losses before a stronger intraweek trend dragged it lower.
Trade war fears
While the Donald is all for peace in the Korean peninsula, it seems like his administration has no problem waging (trade) war against Uncle Sam’s major trading partners.
Word around the hood is that Trump and his team are ready to slap tens of billions worth of tariffs on China’s goods as early as this week, which could prompt the world’s second largest economy to retaliate and escalate the skirmish into a full-blown trade war.
Since New Zealand’s economy depends heavily on its exports, any escalation in trade war rhetoric is bound to bring the bears to the Kiwi’s yard.
Last Week’s Price Review
The Kiwi was a net winner last week and is currently in third place this week (as of 7:00 am GMT).
The Kiwi only barely won out against the pound and the Swissy, though. Also, the trading week is far from over, so there’s no guarantee that the Kiwi will be able to close out a second week of broad-based gains.
Like the Aussie, the higher-yielding Kiwi also had a somewhat strong start, thanks to the risk-on vibes on Monday.
Unlike the Aussie, however, the Kiwi was forced to returns its gains when the U.S. session rolled around. In fact, price action very clearly shows that the Kiwi was tilting broadly to the downside and was the worst-performing currency during that session. No clear reason why, though, since risk-taking prevailed at the time.
It’s possible, however, that market players were just taking some profits off the table after the Kiwi’s bullish run last week. It’s also possible that the Kiwi was weakened by the Greenback’s strength at the time.
In any case, the Kiwi’s price action made sense once more when Tuesday rolled around since the Kiwi broadly climbed higher because of the risk-on vibes during Tuesday’s Asian session and then dipped broadly lower when risk aversion returned during Tuesday’s morning London session.
The Kiwi then traded broadly higher again come Wednesday when risk appetite got revived ahead of the FOMC statement, only to get a beating when the Fed announced a rate hike while also upgrading the projected path for the Fed Funds Rate, which caused risk aversion to return and likely put monetary policy divergence and interest rate differentials into play.
Oddly enough, the Kiwi’s losses were limited, probably because the Greenback quickly erased its post-FOMC gains, which some market analysts blamed on profit-taking ahead of the ECB statement.
However, trade war fears may have also weighed on the Greenback because, as noted in Wednesday’s U.S. session recap, a report from the Wall Street Journal claimed that Trump could put anti-China tariffs into effect by this week.
Anyhow, the Kiwi’s price action then became mixed yet steady for the most part before climbing broadly higher when the ECB statement caused risk appetite to make a strong comeback.
The Kiwi’s would-be rally was cut short, however, when the Greenback began to rally across the board after the U.S. printed a better-than-expected retail sales reading. Also, risk aversion returned during Friday’s Asian session as investors prepared for the U.S. to announce tariffs against China later, market analysts say, which likely further dampened demand for the higher-yielding Kiwi, endangering the Kiwi’s current ranking and threatening to push the Kiwi into the losing side.