Price index for dairy, which reflects the weighted average of changes in the world pieces in percentage terms, has grown by 2.6% at the auction (against the decline of -1.4% two weeks ago). The NZD has grown yesterday due to the good news provided by the company Fonterra. New Zealand’s economy is very vulnerable to the changes in the dairy prices. New Zealand’s economy is focused on exports and about 18% of the total exports are dairy products. Therefore, contribution of dairy exports to the national economy is very significant.

The pair NZD/USD closed yesterday’s trading day with the rise of 20 points. However, with the opening of today’s trading the pair started to decline again and the price returned to the closing price of last Friday at the level of 0.6765.

The USD dominates in the currency market today. Three representatives of the US Fed, such as: Fed President of San Francisco, Mr. John Williams, Fed President of Atlanta, Mr. Dennis Lockhart and Fed President of Dallas, Mr. Robert D. Kaplan) expressed their opinion on Tuesday that interest rates in the country could be increased at the US Fed meeting in June. This opinion is contrary to the investors’ expectations, was they believe that the increase in the interest rate is hardly possible and according to futures for the interest rates, the probability of the event is estimated at 13%.

On Monday, Fed President of Richmond, Mr. Jeffrey Lacker said that there is high probability of a rate hike at the June FOMC meeting. Mr. Lacker said that the state of the U.S. economy is quite good and a negative scenario for the US economy has not been materialized.

In March, Central Bank of New Zealand unexpectedly lowered key interest rate, which caused decline in the NZD in the currency market. As it was said in the comments, the Bank was going to continue monetary policy softening. Probably, the Bank will reduce interest rate again at the meeting on 8 June.

Therefore, taking into account the difference in the monetary policies of the US Fed and RBNZ, we can conclude that the pair NZD/USD will continue to decline until the US Fed meeting on 15 June.

Today at 20:00 (GMT+2) the minutes of the FOMC meeting will be released. The minutes will shed light on the future monetary policy in the USA and will have strong effect on the USD and on the pair NZD/USD.

NZD/USD: price index for dairy products has grown.  Fundamental analysis of 18.05.2016.

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