NZD/USD: NZD is Under Pressure
On Wednesday the largest dairy company of New Zealand “Fonterra” reported the rise in net profit, which was 409 million NZD in the past 6 months compared to 184 million NZD for the previous period. However, this news did not boost the rise in the NZD. After short-term rise at the beginning of the Asian session, the pair NZD/USD continued to decline.
Today at 23:45 (GMT+2) foreign trade balance of New Zealand in February will be released. At the dairy auction last week price index of dairy product fell by 2.9%.
It is likely that this fact will affect exports value in the foreign trade balance.
If the index falls the RBNZ will receive additional reasons for another reduction of the interest rate in the country.
Two weeks ago the RBNZ had already lowered interest rate by 0.25% to 2.25%, which led to sharp decline in the New Zealand currency all over the market. The RBNZ fears that of the further deterioration in the global economy and decrease in inflation expectations.
The US Fed decision to leave interest rate unchanged at the level of 0.5% and the downgrade of the interest rate forecast has been already worked off by the market.
President of the US Fed in Philadelphia, Patric Harker said on Tuesday that positive prospects of the US economy give good prospects for the increase in the short-term interest rates. It is possible that the rate will be raised at one of the meetings of the US Fed; it can happen at a meeting in April. Mr. Harker believes that it will be good to raise interest rates twice this year.
Therefore, different monetary policies of the central banks of the USA and New Zealand affect the pair NZD/USD. It is expected that the key interest rate in New Zealand will be reduced to 1.75% from 2.25% at the meetings of the RBNZ in June and August.
Due to this pressure on the pair NZD/USD will increase in the short-term and medium-term after consolidation of the price below the level of 0.6700, which is crossed by the moving average with the period 144.
The material has been provided by LiteForex - Finance Services Company - www.liteforex.com