Trade Data Drives the Kiwi, While Trump Pins Back the USD

Earlier in the Day:

Economic data released through the Asian session this morning was limited to New Zealand’s February trade figures.

Year-on-year, the trade deficit narrowed from a revised NZ$3,280m to NZ$3,020m, narrowing greater than to a forecasted NZ$3,225m deficit, while month-on-month, January’s revised NZ$655m deficit bounced to a NZ$217m surplus in February.

• Goods exports increased by 11% (NZ$446m) to NZ$4.5bn, year-on-year, while goods import rose by 4.6% (NZ$187m) to NZ$4.2bn over the same period, the February number a new high.
• In February, exports increased to all destinations (monthly movements), with exports to China up 12%, to Australia up 5.3%, USA by 5.1%, to the EU by 12% and to Japan by 23% compared with January.
• The bounce in exports was attributed to rising exports in meat and edible offal (+13%), logs, wood and wood articles (+19%); Milk powder, butter and cheese (+5.3%) and fish, crustaceans and molluscs (+31%).
• On the import front, mechanical machinery and equipment led the way, up 10% (NZ$57m), while crude oil imports fell by 7.8% and vehicles parts and accessories fell by 18%, led by a 33% fall in motor vehicle imports.

The Kiwi Dollar moved from $0.72397 to $0.72328 upon release of the figures before making gains later in the morning, up 0.50% to $0.7269 at the time of writing, supported by the upbeat trade figures.

Elsewhere the Aussie Dollar was up 0.31% to $0.7723, supported by last week’s pickup in commodity and oil prices and a pullback in U.S Treasury yields, while the Japanese Yen lost some ground, down 0.14% to ¥104.89 through the morning session.

With economic data on the lighter side, the markets will be in the hands of Trump and China, with any more tariffs and more material retaliations by China likely to drive risk aversion to new levels.

In the equity markets, it was another sea of red as investors responded to the losses across Europe and the U.S on Friday, the upbeat economic data out of the U.S overshadowed by the continued threat of a trade war between the U.S and China that would have an impact on most economies in the region.

The ASX200 closed out the day with a 0.52% loss, with the Nikkei down 0.33% ahead of the close, while the Hang Seng and CSI300 were down 0.56% and 1.64% respectively, the losses coming in spite of the U.S futures in positive territory, market fears of more trade chatter holding back risk appetite.

The Day Ahead:

For the EUR, economic data scheduled for release this morning is limited to finalized 4^th quarter GDP figures out of France that are forecasted to be in line with 2^nd prelim figures. Barring a deviation from prelim numbers, the stats are unlikely to have a material impact on the EUR, with market risk sentiment through the day likely to be of greater influence.

There will have been some relief last week that the EU was able to garner an exemption from the steel and aluminium tariffs. For the week ahead, any more talk of tariffs on EU car exports to the U.S would be the one to watch, together with any more retaliatory moves by China.

At the time of writing, the EUR was up 0.18% to $1.2375.

For the Pound, macroeconomic data is on the lighter side through the day, with stats limited to mortgage approvals that are unlikely to have an impact on the Pound, focus on the Pound will continue to be Brexit and the ongoing trade spat between the U.S and China that could spiral out of control at any time.

At the time of writing, the Pound was up 0.22% to $1.4163, with the markets likely to be drip fed more summaries from last week’s Euro Summit to provide direction for the Pound on Brexit.

Across the Pond, there are no material stats scheduled for release that will give February’s Chicago FED National Activity Index and FOMC members’ greater influence on the markets through the U.S session.

FOMC members Dudley, Mester and Qaurles are scheduled to speak and there will be some interest, if any of the members suggest that the FED may need to hit the pause button in the event of a trade war.

The U.S President has certainly achieved the goal of a weaker Dollar, though even the weaker Dollar has done little to stem the tide of demand for foreign goods through the year, as the goods trade deficit continues to widen.

At the time of writing, the Dollar Spot Index was down 0.04% at 89.4, giving up gains from earlier in the morning, with the greenback in the hands of the U.S President and China, any moves by either side that are considered to be a negative for the respective economies, likely to also be a negative for the U.S Dollar.