The Kiwi stayed away from one-directional moves for most of last week. Will we finally see trends this week?
Trade balance (July 24, 10:45 pm GMT)
New Zealand printed a trade surplus of 294M NZD in May, reflecting that exports had gone up by 10.4% while imports had also improved by 5.7%.
Unfortunately for the bulls, traders were much more worried about an escalating trade war with China and the high-yielding Kiwi ended the session lower than its major counterparts.
This week market players are expecting the trade surplus to narrow down a bit to 200M NZD in June. Australia will be printing its own set of top-tier releases, though, so you might want to wait a bit before placing your longer-term trades on the comdoll.
Risk and dollar sentiment
As you can see below, the Kiwi’s price action was also heavily influenced by Greenback trends and overall risk appetite.
This week pay attention to a possible escalation of a CURRENCY war. If you recall, the Donald has done damage to the dollar after criticizing the Fed’s interest rate hikes, while the People’s Bank of China (PBoC) had lowered its yuan mid-point fix for consecutive days last week.
Uncertainties relating to the world’s two largest economies can greatly affect export economies like New Zealand’s so make sure you don’t miss any relevant headlines!
Last Week’s Price Review
The Kiwi is currently on course to closing out the week on a mixed note (as of 7:00 am GMT).
The Kiwi had a weak start, very likely because of the risk-off vibes on Monday. The Kiwi wasn’t as weak as the Aussie, though, likely because of short covering ahead of New Zealand’s CPI report.
And when Statistics New Zealand finally released the Q2 CPI report, the Kiwi’s initial reaction was to try and move lower since New Zealand’s CPI failed to meet the market’s expectations. Risk appetite briefly returned during Tuesday’s Asian session, though, which is likely why follow-through selling pressure didn’t materialize.
Moreover, the RBNZ released its own CPI report a few hours later and market players zoomed in the sectoral factor model, which is the RBNZ’s preferred measure for core inflation, since the reading came in at 1.7% year-on-year in Q2, which is the highest in seven years. And market players were obviously quite happy about that since the Kiwi surged higher across the board.
Risk aversion returned during Tuesday’s London session, however, so the Kiwi’s rally was cut short and NZD pairs began to turn lower again. Also, the Greenback was on the offensive at the time, which likely put the hurt on the Kiwi as well.
The Kiwi would finally find a bottom and then move higher against most of its peers when the Greenback’s rally stalled during Wednesday’s U.S. session.
Sadly for the Kiwi, the Greenback would regain its footing come Thursday. Worse, risk aversion returned during Thursday’s London session, so the Kiwi turned lower again.
The Kiwi’s bleeding would finally stop when Trump said during a CNBC interview that he’s “not thrilled” with the Fed’s recent rate hikes, which caused the Greenback to tank. And most NZD pairs have been tilting slightly to the upside after that.