Neil Davies, Head of Trading at PlutusFX, takes a look at the New Zealand Dollar:
NZD’s bad run against the USD, which turned earlier this month, has continued its improvement.
NZD/USD peaked last July at 0.88, then continually grew weaker during H2 2014, finally finding a floor at 0.7177 earlier this month. The pair is currently standing at a one month high of 0.76 following the release of an upbeat New Zealand trade balance data. January produced a trade surplus of NZD 56M against an expected deficit of 162M and markedly ahead of the 195M deficit in December.
The Kiwi also gained against the Aussie, currently standing at AUD/NZD 1.04. The strengthening in this pair for NZD has been generally consistent in the favour of the Kiwi since early 2011, when it peaked at 1.37. Despite some gains in 2014 for the Aussie, the direction has since re commenced, with many strategists predicting that parity will be reached sometime this year.
Net migration to New Zealand is also a driver, with fewer departee’s to Australia and the arrival of more Indians to study. This is causing the housing market to somewhat overheat, particularly in Auckland. This is compared to an Australian economy that showed a bigger than expected 2.2% capital expenditure fall in Q4 2014, where a further interest rate cut is seen as likely.
It will be interesting to see if the New Zealand Cricket team can keep the momentum going their way when they meet their counterparts on Saturday.