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NZD/USD: inflation expectations has dropped


16 February 2016

Although retail sales in New Zealand had grown in Q$ (1.2% against the forecast of 1.4% and 1.5% in the previous quarter), the pair NZD/USD fell earlier this morning. According to reported released by the Reserve Bank of New Zealand, inflation expectations in Q1 was lower than in the previous quarter (1.6% against 1.9% in the previous quarter). 

Today, dairy auction results will become known. The price index for dairy products from Global Dairy Trade will be released at 17:00 (GMT+2). It will reflect the weighted average of the price change. A quarter ago this index showed the decline (-7.4%), which confirms the tendency of decline in price of the world dairy products and of the commodity goods as a whole. 

New Zealand is the largest supplier of dairy products in the global market. The decline in price of this type of exports will cause reduction of export proceeds in the country’s budget and will trigger the fall in the exchange rate of the national currency. 

On Wednesday (23:45 GMT+2) selling indices and purchasing prices of manufactures for Q4 of last year will become known. Amid declining prices of commodities in the world, these indices are likely to decrease, which will indicate slowdown on inflation in New Zealand. 

The other negative factor, which has a negative impact on the state of New Zealand’s economy, is decline in Chinese economy, as China is the largest trading partner of New Zealand. 

All these negative factors will continue to put pressure on NZD. Note, that the head of RBNZ, Graeme Wheeler keeps saying that interest rates in the country can be decreased in order to support local manufactures and economy of New Zealand. The next meeting of RBNZ will be held in March.

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