NZD/USD Fundamental Analysis – for the week of August 22, 2016 -Forecast

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Published: Aug 20, 2016, 07:10 UTC

The NZD/USD is trading at 0.7264 with a gain of 1% for the week as continued data flow was positive as well as climb in dairy prices. Prices have risen

NZD/USD Fundamental Analysis – for the week of August 22, 2016 -Forecast

The NZD/USD is trading at 0.7264 with a gain of 1% for the week as continued data flow was positive as well as climb in dairy prices. Prices have risen significantly in the global dairy auction this week. The average price rose 12.7 percent overnight to $2731 a tonne. It followed a 6.6 percent rise at the previous auction.

The important whole milk powder price climbed by 18.9 percent to $2695 a tonne. Prices need to hit about $3000 a tonne for farmers to break even, but this is the highest the index has been since October last year and all the commodity prices are up by at least 2 percent.

Speculators had predicted the cut of 25 basis points as the Reserve Banks makes efforts to get inflation back into the 1 to 3 percent band and counter a high-flying currency.

Reserve Bank Governor Graeme Wheeler signaled the central bank was also prepared to cut the rate further. He said weak global conditions and low international interest rates were placing upward pressure on the New Zealand dollar.

“This makes it difficult for the bank to meet its inflation objective. A decline in the exchange rate is needed,” Mr Wheeler said.

The domestic economy remained robust, underpinned by strong migration and tourism, construction activity, and low interest rates. Mr Wheeler also reiterated his concern about the surging housing market, which could undermine the financial system.

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Week of August 22-25, 2016

Date	Country	Name	Volatility	Previous
8/23/2016	GBP	Inflation Report	3
8/24/2016	EUR	GDP w.d.a (YoY)	3	1.8
8/24/2016	EUR	GBP s.a (QoQ)	3	0.4
8/24/2016	EUR	GDP n.s.a (YoY)	3	3.1