Why Kiwi Could Rise Ahead of RBNZ Decision

New Zealand is a relatively small country of more than 7 million people and a GDP of more than $205 billion. The country derives most of income from the dairy, eggs, and honey industry, which is responsible for more than $10 billion. Other main exports are meat, wood, and fruits, which are responsible for more than $5.2 billion, $3.6 billion, and $2.2 billion respectively. Most of these exports go to countries like Australia and China.

Today, the country released the trade numbers for the month of February. The numbers showed that exports rose to N$4.82 billion, which was higher than the expected N$4.70 billion. This was also higher than the January’s exports of N$4.33 billion. Imports on the other hand declined to N$4.8 billion, which was lower than the expected N$4.90 billion. In January, the imports were worth more than N$5.28 billion. As a result, the trade balance rose by N$12 million in the month, which was better than the expected deficit of N$200 million. The deficit rose to N$6.6 billion, which was better than the expected N$6.675 billion.

Later today, the Reserve Bank of New Zealand (RBNZ) will release the interest rates decision. The bank is expected to leave rates unchanged at 1.75%. What might move the markets is the bank’s statement, justifying the reason for the decision. The trade numbers released today could provide some support to the bank because the previous worry was that the slowing Chinese growth could hamper the economic growth.

In the past few days, the NZD/USD pair has moved up from a low of 0.6745 to a high of 0.6940. Most of these gains come at a time when the Federal Reserve has changed its decision on interest rates and at a time when investors have started worrying about the inversion of the yield curve. The pair is above the 21-day and 42-day EMAs while the Average Directional Index (ADX) has moved to above 25. There is a likelihood that the pair will move higher ahead of the RBNZ decision.

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