With the deterioration of New Zealand’s investments outlook, Short NZD/USD?
Business confidence balance declined to -50.3 from -44.9 in July as firms expect general business conditions to weaken in the year ahead
- Global Dairy Auction prices fell has been on a downtrend, which could pressure on the country's primary export. Furthermore, dairy prices could continue to fall if Canada loosen supply management terms during NAFTA negotiations.
- New Zealand Prime Minister Jacinda Ardern has announced the formation of a new business council aimed at strengthening the relationship between businesses and the Government.
- She said that “The new council work will focus on macro level economic strategy and active leadership on our economic agenda to build a more productive, inclusive and sustainable economy." However, we are no longer expecting a recovery in the coming months as the current business issues are due to global trade situation and not organic demand.
- If Canada does not accede to the new terms, US could pull out of NAFTA and enter into a new agreement with Mexico only. President Trump also threatened to slap Canada with 25% tariffs on auto imports.
- The New Zealand government moves to raise the minimum wage and possible industrial law changes have been partly blamed for the slump in confidence.
- However, firms' perceptions of their own prospects were a much better gauge of actual economic outcomes. The activity outlook index held steady at 3.8 percent.
NZD/USD has been on a slide after a string of weak economic data as well as dovish policies. We could see NZD/USD hit 0.6550 in weeks to come. With no recovery expected ahead of times, we will continue to stay bearish.
Fullerton Markets Research Team
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