The New Zealand dollar remained nearly unchanged on the week despite trading in an uncharacteristically large 200 point range. A weak trade balance report on the 27th sent it to a new two-year low before the dovish US FOMC rate decision allowed it to recover its losses. Now standing at a congestion level high near 0.6090, the currency pair looks to try to move higher in the coming week. With no noteworthy economic data on the horizon, the NZDUSD will likely trade on upcoming news reports out of Australia.
Starting off on Monday, Australian Retail Sales look to send mixed signals on the state of its national economy. Predicted to print at a 0.2% monthly gain, May Retail Sales growth will likely pale in comparison to Aprils 1.4% up-tick. Given that the economies are such close trade partners, a slowdown in Aussie consumption would likely hurt the New Zealand economy and prove bearish for its currency. Moving forward, markets will subsequently await the Reserve Bank of Australia interest rate decision on Wednesday. Though such a release has the potential to shake the New Zealand Dollar currency pairs, rates are likely to remained unchanged and traders will remain unfazed by such a result. That being said, any surprise moves could certainly cause a sharp rise in volatility in the Kiwi dollar. The next significant news out of the New Zealand economy will come on July 12th, when government officials will report the May monthly change in retail sales. With a fairly gloomy outlook on overall national growth, currency strategists expect relatively little Kiwi-bullish news in the coming weeks.
This past week saw the Kiwi dollar plummet to its lowest levels since May 2004 on a worse-than-expected trade report. Though perhaps not overly shocking given the previous weeks poor Current Account Balance result, traders only intensified their sell-off of the national currency on the news. The NZ$103.5 million trade deficit marked a return to a negative balance after the previous two months of net surplus. It is worthwhile to note, however, that the number did not come as a result of lower exports, which rose from NZ$3.02 billion to NZ$3.65 billion in May. Instead, an even-larger hike in imports tipped the scale and disappointed analysts who predicted a NZ$50.0 million surplus on the month. The weeks losses were erased by Friday, however, as the US Feds interest rate hike disappointed markets expecting a more hawkish stance from the central bankers. Indeed, the lower probability of a narrowing interest rate spread on the NZDUSD will keep Kiwi bulls from liquidating their remaining carry trade positions.
