New Zealand Dollar Gains On Export Strength, RBNZ In Focus

NEW ZEALAND DOLLAR, TRADE DATA TALKING POINTS:

• NZD/USD rose a little on strong New Zealand trade data
• Exports recorded their second highest value reading ever
• NZ is heading into probable trade squalls in good shape

The New Zealand Dollar rose modestly on Wednesday following the release of official trade figures which showed the second-highest export level on record.

Exports rose nearly 10% on the month to NZ$5.4 billion (US$3.7 billion) in May, taking the trade balance to a higher than expected NZ$294 million, much above the NZ$100 million forecast. Meat exports saw the biggest increase, with forestry products coming in second. The most popular export destinations were China, Singapore and Hong Kong. Imports rose by 5.7% to NZ$5.1 billion. More cars were imported than a year ago, but fewer petroleum product imports.

Overall, this was quite a strong set of numbers, suggesting that New Zealand is at least heading into whatever global trade storms may be brewing in good shape. They didn’t move the New Zealand Dollar very far, however, probably because the markets are more fixed on the Reserve Bank of New Zealand’s monetary policy decision. That is coming up on Thursday.

This is not expected to produce any rise in the record low 1.75% Official Cash Rate, but investors will of course be keen to see the central bank’s usually brief statement. Business confidence has been worryingly low in the country this year and the markets will want to gauge official worry levels about this.

NZD/USD remains in the downtrend .which has endured since early April on its daily chart. Interest rate differential prospects remain clearly in favor of the greenback and are likely to remain so. However, the kiwi does seem to have found some support around the lows of mid-May.

It will be interesting to see whether this support can survive if the RBNZ proves very dovish on Thursday. If it can, then New Zealand Dollar bulls may feel encouraged, although the rather gloomy interest rate differential backdrop against the US currency will endure in any case.

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