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NZ Dollar Sentiment Bias Bearish After Gain on Current Account Data

NZ Dollar Sentiment Bias Bearish After Gain on Current Account Data

Varun Jaitly,

Talking Points:

  • The New Zealand Dollar rose tepidly as the trade deficit narrowed in Q3
  • The current account gap posted at –NZ$0.618b vs. –NZ$0.900b expected
  • Deficit-to-GDP ratio improved to match the best reading in three years

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The New Zealand Dollar rose tepidly following better than expected current account figures thatrevealed a smaller deficit than economists expected in the third quarter.

The shortfall registered at –NZ$0.618 billion, far smaller than the –NZ$0.9 billion expected by economists. The deficit-to-GDP ratio improved to -2.8% from -3.1% previously. That matched the reading from the fourth quarter of 2016, which at the time marked smallest negative contribution to overall growth from the external sector in three years.

Of the major components that contribute to the current account calculus, the balance New Zealand on trade in goods and services narrowed to NZ$1.81 billion from NZ$2.87 billion while the deficit on the income and transfers side of the equation was reduced to –NZ$2.43 billion from –$NZ2.65 billion.

NZ Dollar Sentiment Bias Bearish After Gain on Current Account Data

From here, the spotlight turns to New Zealand GDP numbers due at 22:45 GMT on Wednesday. The next RBNZ interest rate decision is scheduled for September 28 and will be the last policy meeting until November.

IG Client Sentiment data shows 54.3% of retail traders are net-long NZD/USD, with the ratio of traders long to short at 1.19 to 1. The number of traders net-long is 15.0% higher than yesterday and 1.9% higher from last week, while the number of traders net-short is 7.0% lower than yesterday and 6.6% lower from last week.

As noted in our Sentiment Guide, the fact retail traders are net-long suggests NZD/USD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes hint at a stronger NZD/USD-bearish contrarian trading bias.

NZ Dollar Sentiment Bias Bearish After Gain on Current Account Data

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