- NZD/USD consolidates the previous day’s gains, shrugs off NZ data amid cautious mood before RBNZ.
- New Zealand Trade Balance drops to $0.73B in April, Exports and Imports also decline in April.
- Market’s mood remains sober amid mixed catalysts, reflation fears.
- RBNZ may repeat policy status quo but economic forecasts, statements will be the key.
NZD/USD pays a little heed to New Zealand (NZ) trade numbers, published during Wednesday’s Asian session, while taking rounds to 0.7220, down 0.05%. Although the kiwi pair seems to consolidate the previous day’s gains, traders remain worried ahead of the key event.
New Zealand’s headlines Trade Balance marked a notable drop from $1.7B to $0.73B in April. Details suggest the Imports slipped beneath $4.98B from $5.66B whereas Exports eased below $5.69B to $5.37B for the stated month.
The lack of market reaction to the NZ data could be traced to the cautious sentiment ahead of a more important event for NZD/USD traders, namely monetary policy meeting of the Reserve Bank of New Zealand (RBNZ).
Also contributing to the sluggish mood could be the mixed messages from the US Federal Reserve (Fed) policymakers relating to the inflation risks. Additionally, downbeat US data and a lack of major catalysts add to the market’s indecisiveness of late.
It should, however, be noted that the US dollar index (DXY) bears the burden of this subdued trading and dropped to the fresh low since early January the previous day. Also on the south-run was the US 10-year Treasury yield that refreshed monthly low. That said, S&P 500 Futures print mild gains even as Wall Street closed with smaller losses.
Looking forward, the RBNZ rate decision, up for publishing at 02:00 GMT, is the key for NZD/USD traders even as the policymakers aren’t expected to alter either benchmark rate or bond purchase programs. The crucial part of today’s event will be the economic forecasts and statements relating to the inflation pressure inside the nation that stood first to overcome the coronavirus (COVID-19).
Ahead of the release, Westpac said, “We expect the RBNZ Monetary Policy Statement will leave policy settings unchanged. The economic outlook has improved on balance, despite a soft patch in growth over the summer period. Inflation is expected to rise well above 2% this year, but the RBNZ has already foreseen this and will regard it as temporary. We expect the April trade balance will print a wider surplus of $390mn, with imports easing after a catch-up in March.”
Read: RBNZ Preview: Improving economic performance but same policy
Technical analysis
Failures to cross the 12-day-old falling trend line, around 0.7240, pull NZD/USD back to 0.72015, comprising 21-day SMA. However, any further downside will be challenged by a 50-day SMA level of 0.7140. Overall, the kiwi pair remains in the consolidation mode.
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