New Zealand is scheduled to bust out top-tier reports this week! How will bulls and bears react? Here’s a list of the potential catalysts.
Quarterly GDP and monthly trade balance (Dec.19, 9:45 pm GMT)
The party will really start on Wednesday night when New Zealand posts its Q3 2018 GDP numbers.
The economy posted a 1.0% growth in Q2, which marked the fastest quarterly growth in two years. Heck, the RBNZ only predicted a 0.5% uptick! Turned out, 15 out of 16 industries saw expansion during the quarter.
Market geeks think the economy will take a chill pill in Q3 as the effects of temporary factors like weather-related recovery in milk solids and above-average hydro lake levels are pushed out of the equation. Not only that, but they also expect higher oil prices and lower demand for goods and services to weigh on the economy a bit.
The only see a 0.6% quarterly growth in Q3 while the annualized growth is seen to remain at 2.8%.
A separate report will be printed at the same time as the GDP data. I’m talking trade balance, yo!
Analysts see the deficit narrowing down from 1,295M to 880M in November. Unless we see significant data hits or misses, however, it’s likely that market geeks would pay more attention to catalysts such as the GDP report or the FOMC statement scheduled hours before the trade balance release.
Overall risk sentiment
As you can see below, Kiwi bulls and bears still like to take cues from market risk sentiment.
Fortunately for forex warriors, events such as the Fed, BOJ, and BOE’s policy announcements; Brexit updates, and Uncle Sam’s top-tier releases could provide interesting volatility over the next couple of days.
Make sure you’ve marked the important bits in your forex calendars so you don’t get left behind once prices spike all over the charts!
Last Week’s Price Review
The Kiwi is headed for its second week of net losses since the Kiwi is currently THE worst-performing currency of the week (as of 8:00).
The Kiwi was actually a net winner for most of the week, but it got hit hard by intense selling pressure across the board on Friday. And unfortunately for the Kiwi, that was enough to push all NZD pairs below last week’s closing prices.
The Kiwi had a promising start, thanks to Greenback weakness and the risk-on vibes during Monday’s Asian session. Risk aversion returned during Monday’s London session, though, so the Kiwi’s rally stalled.
Kiwi bulls would renew their push during Tuesday’s Asian session, however, since China’s Commerce Ministry announced that Vice Premier Liu He had a telephone conversation with U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer, and that:
“Both sides exchanged views on putting into effect the consensus reached by the two countries’ leaders at their meeting, and pushing forward the timetable and roadmap for the next stage of economic and trade consultations work.”
Follow-through buying on the Kiwi was only limited, though, despite the risk-friendly vibes. No clear reason why.
Fortunately for NZD bulls, risk-taking persisted during Tuesday’s London session and there was a Bloomberg report which claimed that a proposal to slash the tariffs on imported U.S. cars from 40% to 15% has supposedly been “submitted to China’s Cabinet to be reviewed in the coming days.”
NZD bulls would later run out of steam since risk aversion returned during Tuesday’s U.S. session.
However, demand for the Kiwi was revived again when Trump was interviewed by Reuters just before Wednesday’s Asian session rolled around since Trump was optimistic that a trade deal with China can be struck. Trump also said that he’s ready to intervene in the arrest of Huawei CFO Meng Wanzhou if he thinks it’s “necessary”. Moreover, Trump said it would be “foolish” if the Fed hikes next week.
Follow-through buying was only limited, though, and the Kiwi turned broadly lower despite the persistent risk-friendly vibes.
There were no direct catalysts, but there were a couple of major risk events on Wednesday, namely the leadership challenge against Theresa May and budget talks between the E.U. and Italy. And those may have dampened demand for the Kiwi and/or prompted NZD bulls to take some profits off the table.
Fortunately for the Kiwi, those risk events turned out okay, so risk-taking resumed during Thursday’s Asian session.
Risk aversion did eventually return during Thursday’s London session, though, limiting the Kiwi’s gains.
Worse, the Kiwi began encountering sellers when the RBNZ announced that it is “consulting on a proposal to raise the amount of capital that banks must hold.”
The proposal to increase reserve requirements made market players worry about New Zealand’s growth prospects, some market analysts say. After all, if the New Zealand economy is doing A-Okay and growth prospects are balanced or somewhat good, then why the need for all that extra capital?
Other market analysts, meanwhile, chose to focus on the the tighter credit conditions (and slower economic growth) that would very likely result if such a proposal was implemented.
In any case, risk aversion persisted during Friday’s Asian session, and since the Kiwi was already weakened by the RBNZ’s announcement, the Kiwi ended up taking the brunt of the risk-off vibes, so much so that the Kiwi became a net loser after being a net winner for most of the week.