New Zealand Prints Trade Deficit for Secound Consectutive Month
The TAKEAWAY: [New Zealand Trade deficit expands to 805M] > [Strength of the
kiwi contributes to deficit]> [NZDUSD declines on the new]
Weak global outlook hit the New Zealand’s trade balance on two fronts, resulting in lower demand for its exports and rising export prices due to the rising strength of the NZD. The trade balance deficit increased for the second month in a row, standing at -805M (YTD), the NZDUSD dropped 10 pips on the release of the economic data. The data coming out of New Zealand was not all negative today, the May monthly trade balance resulted in a surplus of NZ$ 301B. Exports increased by 14 percent month over month to NZ$ 4.42B and imports rose at a faster rate of 16 percent month over month to NZ$ 4.11B. The data pointed to the possibility of imports growth out pacing the growth of exports, resulting less demand for the kiwi relative to other currencies.
Chart created using Strategy Trader- Prepared by Adrian Robles
The NZDUSD traded sideways in a tight channel in the hours leading up to the data release. The pair was at the low end of that channel as the announcement was made and crossed over the blue resistance line in the minutes to fallow. In the minutes leading up to the to the release of the trade balance data, the fast moving average crossed over the slow moving average signally a switch in trends to the downside.
April was the first month since March 2010 that New Zealand ran a trade deficit. The Reserve Bank of New Zealand has stated that the strength of the Kiwi has put New Zealand at a trade disadvantage. The NZD has appreciated against most major currency thus far this year. During the month of May the Kiwi gave back some of its strength which may have contributed to the expansion of exports for May. Throughout June the NZD has regained steam and is climbing higher, this could point to future declines in exports. Today’s data may help moderate the Kiwi, but will not be a driving force in value of the currency well risk aversion in driving the market.
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