NZD/USD Fundamental Forecast – July 27, 2016

The NZD/USD added 9 points in the morning session taking advantage of the weaker US dollar. The kiwi is trading at 0.7005 after rallying hard yesterday. The dollar was buoyant as the risk-on mood inspired by solid U.S. economic data and fading fallout from Brexit continued to lift the U.S. currency and assets.

Upbeat U.S. business activity data out on Friday also added to prospects of a Federal Reserve interest rate hike within the year and supported the greenback.

The global improvement in risk sentiment – Wall Street shares have hit consecutive record highs this month – has weighed on the Japanese currency, which has fallen roughly 7 percent against the dollar from a three-year peak reached soon after the Brexit referendum a month ago.  “Thanks to strong indicators, concerns about the U.S. economy after Brexit have receded.

The New Zealand dollar was little changed as investors continued to eye the upcoming Federal Reserve policy meeting in the hopes of a steer on when the world’s biggest central bank might start raising interest rates.

“The market will have tomorrow night’s US FOMC meeting firmly in its sights,” Kimberly Martin, senior market strategist at Bank of New Zealand in Wellington, said in a note. “But we would be surprised if the inherently dovish Fed were to cause the market to notably ramp up its rate hike expectations, and hence provide a significant boost to the US dollar. That task will likely fall to future data delivery.”

Official figures show a trade balance surplus of $127 million in June, compared with a surplus of $348m the month before but a deficit in the same month a year ago. The country has posted a monthly trade surplus for the past six months, and that’s helped to narrow the annual deficit to $3.3 billion.

Exports climbed 2.6 percent on a year ago, while the value of imports fell 4.6 percent.

Statistics New Zealand said the value of kiwifruit was the highest on record in both May and June, boosting annual sales to an all-time high of $1.7 billion.

A senior economist with ANZ Bank, Phil Borkin, said other agricultural products were filling the gap caused by the downturn in the dairy sector.

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Wednesday, July 27, 2016

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