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On March 21, 2012, at 9:45 pm GMT, Statistics New Zealand will be releasing its latest GDP figures. Take note that because this report is the broadest measure of country’s economic activity, it tends to have a major impact on the Kiwi’s price action.

Expectations are that New Zealand grew by 0.6% in fourth quarter of 2011, down from the 0.8% growth we saw in the previous quarter. Despite strong showings in the farming, retail trade, and construction industries, there was a large drop in manufacturing activity.

This took out a huge chunk of the country’s production. In fact, word on the street is that the slowdown in manufacturing activity reduced total GDP growth by as much as 0.25%.

Overall though, 2011 was actually a pretty awesome year for New Zealand. Quarter-on-quarter GDP growth has checked-in positive four times in a row now, reflecting the slow-but-steady prolonged recovery that many analysts had been predicting.

Moreover, if it wasn’t for the Christchurch earthquakes, chances are that New Zealand’s growth would have been even more impressive and quite possibly one of the best amongst the major economies.

In fact, an economist from Westpac said that other developed countries are green with envy with how well New Zealand is doing right now!

In any case, let’s see how the upcoming GDP report could affect price action. I see two potential scenarios:

NZD/USD 4-hour Chart

1.) The first scenario is a surge in price due to the GDP report coming in better-than-expected or at least in line with forecast. This is generally what the market is predicting will happen as it is supported by the current market sentiment.

If you look at the past few trading sessions, it is pretty clear that risk appetite has picked up. As I have mentioned above, it also no mystery that New Zealand’s has been relatively better than other major countries.

A 0.6% quarterly growth rate could possibly set a precedent for more positive data, which could stoke speculation that the Reserve Bank of New Zealand (RBNZ) would raise interest rates due to inflation fear.

2.) The second scenario is less likely since it is against the overall trend but it is of course still possible. If the actual figure comes in worse than forecast, then NZD/USD could fall back down to test former lows at .8100.

That’s it for my short preview of the upcoming New Zealand GDP report. Feel free to pick apart my analysis and tell me why you agree or disagree with it in the comments!