19 February, 2019
Coming up during the Asians session, we have a couple of pieces of New Zealand macro data that could generate some waves in the currency markets: the bi-monthly dairy price index and PPI data.
The latter gets more attention given the kiwi habit of not publishing monthly inflation data. Here are some things to consider ahead of the potential moves in the markets.
The Global Dairy Trade Price Index has lost some of its prior relevance to the NZD as the economy has diversified over the last few years. However, it is still important.
Over a fifth of New Zealand exports in dollar terms are dairy products. There is no fixed time of release, which makes anticipating the associated market moves a little harder.
Over the last couple of months, dairy prices have been far surpassing expectations. The last publication at the start of the month was forecast to have increased by 0.1% but jumped 6.7%.
Over 25% of New Zealand’s exports go to China, which has continued to increase demand despite slowing economic growth. However, in the immediate term, diplomatic issues related to the dispute over Huaweihave led to the postponement of dairy and tourism initiatives between the countries.
The other factor is long-term price trends due to supply issues. Earlier today Danone, one of the world’s largest dairy consumers, stated in their quarterly report that they are expecting increased supply costs, going forward. This is due to ongoing supply issues, as it takes at least two years to bring new production online.
Even without the longer-term supply issue, the polar vortex in North America in the last 2 weeks has led to a significant drop in production. This is because the affected area is one of the world’s largest dairy producing regions. This, of course, will have an impact on the price. But, now that weather has normalized, it should help bring the price closer to the longer term trend.
GDT Price index is expected to rise by 2.2%, which is still considerably above the annual average.
PPI in New Zealand takes the place of monthly CPI. It is the leading measure of consumer price inflation. This is because the increasing output of producer prices is indicative of how much consumers are buying those products.
We should factor the currency effect into this data since the cost of imports tends to determine a lot of the producer prices. As a relatively small economy, New Zealand imports most of its industrial consumer goods. Some of this effect is tempered by the tandem movement of the NZD and AUD, which is the country’s largest trading partner.
Over the last three months, both input and output prices have increased. However, they remain below 2.0%, which is the target inflation rate for the RBNZ. Output prices have been rising faster than input prices. Of the last eight months, NZ has run a trade deficit during seven, with imports rising above exports largely driven by crude prices.
Expectations are for input prices to moderate their rise. They are also expected to grow by 1.1%, while output prices are forecast to rise by just 0.6%.
The US dollar, which was trading subdued the past few days held steady ahead of the FOMC meeting today. The Fed will be releasing its economic...
A number of ongoing global narratives kept a lid on the markets with USD trading subdued ahead of major events this week. These include the two-day...
Economic reports from the UK showed that the GDP rose 0.2% in the three months to January. On a quarterly basis, the economy picked up the pace, rising 0.5%...
The latest business surveys, measuring activity in the manufacturing and services sector for the eurozone painted a mixed picture. The overall...
The U.S. dollar weakened on Friday amid the jobs report which dented the market sentiment which was already turning sour. Concerns of a global...
The U.S. Federal Reserve released the meeting minutes from the monetary policy meeting from early January. The central bank's minutes showed...
The Swedish central bank held its monetary policy meeting last week where it left the key interest rates unchanged at -0.25 percent. The central bank...
The yellow metal has exploded higher over the last 12 hours as a combination of factors joined forces to fuel a surge in demand. Firstly, there is increased...
Britain economic growth slowed sharply in the fourth quarter of 2018. The yearly growth was the slowest in six years, as Brexit worries...