Kiwi Dives on Uncertainty in Manufacturing Sector
New Zealand Performance of manufacturing Index fell 5.5 points during the month of June; the NZDUSD sold off on the news. The Index now stands at 50.2, meaning surveyor opinion is uncertain whether the New Zealand Manufacturing sector will grow or contract. Additionally the May figures were revised higher to 55.8 point, indicating an opinion of modest expansion in the manufacturing sector. The index print acts as a precursor to economic development, but in this case the indicator really highlight shift in optimism among manufacturing leader.
Chart Created by Adrian Robles, GMT 5 min MarketScope Chart
The pair sold off in reaction to the uncertainty of the print and the loss of optimism among business leaders. The NZDUSD dropped 30 pips in reaction to the new release and is sitting at 0.79457 (at time of writing). The negative reaction to the fundamental change provides the insight that trader are not willing to take on the risk concerning the uncertainty of the manufacturing sector.
In addition traders often focus on the commodity aspect of the New Zealand economy when deciding to make bets on the kiwi. So the tone for the NZD has already been set by the upcoming release of the Chinese GDP. It is already predicted that the growth of the Chinese economy will began to slowdown. Subsequently a slowdown in the Chinese economy would mean less demand for New Zealand exports, and less demand for New Zealand Dollars.
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