Due to strong data on the foreign trade balance in New Zealand, the NZD went up on Wednesday, bouncing from 2-month lows against the USD at the level of 0.6700. Foreign trade balance in New Zealand amounted to 292 million NZD in April against the forecast of 60 million NZD. Yesterday’s rise in the pair NZD/USD was also triggered by the US Purchasing Managers’ Index (PMI) in the service sector, which fell to 51.2 in May against the forecast of 53.1 and 52.8 in April.
However, today, the decline in the pair NZD/USD continued after the release of Fonterra forecast, which disappointed investors. This forecast defines the basic prospects of earnings for many farmers of New Zealand for the next 12 months. Agriculture is one of the key sectors of the New Zealand’s economy, which is focused on exports. Dairy products constitute about 18% of the total exports. Low world prices of dairy and other agricultural products negatively impact economy of the country. The decline in world prices of commodities, including dairy, reduces export revenues to the country’s budget, and decreases farmers’ income and their purchasing power.
It means that another important event, such as presentation of the country’s budget, which provides for achieving a surplus of 668 million NZD in the fiscal year, which will finish in June, has escaped much attention, amid disappointing forecast by Fonterra.
The pair NZD/USD is still under pressure, trading near the level of 0.6720.
Today’s news will include US macro-economic statistics for April and May at 14:30 (GMT+2). In case of the positive statistics, the USD will strengthen its positions in the currency market and in the pair NZD/USD.
Difference in the monetary policies of the US Fed and RBNZ will remains the main fundamental factor, which will continue to put pressure on the pair NZD/USD, causing further decline in the pair.