Absolutely no love for the Kiwi this week despite a string of arguably net positive updates from New Zealand. The likely culprit is likely the continued expectation of further cuts, and a bit of global risk aversion sentiment that has been a focus in recent weeks, which went into over drive on Friday.
New Zealand Headlines and Economic data
- New Zealand output producers price index (PPI) rose 0.5%, Input PPI rose 0.3%
- Dairy product prices for manufacturers up 8.7%
- The Business NZ Performance of Services Index in New Zealand rose to 54.7 in July 2019 from an upwardly revised 53.0
- New Zealand credit card spending -1.8% m/m; +5.0% y/y
- RBNZ’s heavy rate cuts reduce need for unconventional policy – asst.governor
- We can see a broad move lower in Kiwi pairs during the morning Asia session, and without a direct catalyst from New Zealand, it was likely a sympathy move with its close trading partner, Australia, after the August Australian Flash PMI showed business activity decreased for first time in five months.
- Our Rate Cut Reduces Probability of Having to Do More Later, Says RBNZ’s Orr
- Retail sales in New Zealand rose a modest 0.2% in Q2 of 2019, after a 0.7% advance in the previous period
- Risk aversion sentiment picked up big time during U.S. session on Friday to send the Kiwi lower against the other major currencies and take the title of “biggest loser” into the weekend. The volatility came after news that China will retaliate with tariffs on $75 billion worth of US goods and resume auto duties, and the fears accelerated after Trump orders US companies to look for ‘alternative to China’ in tweet to fuel the trade war flames.