Positive statistics on New Zealand released yesterday and today allowed the currency to consolidate in the market. According to Tuesday's statistics, New Zealand's business confidence index increased for the third consecutive month, by 11.3% in May against April's value of 6.2%. This indicates an increase in business investment, which has a beneficial effect on the production sector. Statistics New Zealand's terms of trade index published today grew 4.4% in the first quarter as compared with the previous value. The index displays the export to import volume ratio. In essence, the growth is caused by a fall of import prices, which suggests a BOP surplus growth.
New Zealand's inflation expectations have hardly changed amounting to 1.39% against April's value of 1.42%.
After the Central Bank of New Zealand dropped unexpectedly the key rate, the NZ dollar skidded. In a further comment, the Reserve Bank of New Zealand outlined its concern about further aggravation of the world economy's prospects and decrease in NZ's inflation expectations.
The available indicators suggest that NZ's economy does not currently require any stimulation in terms of monetary policy. Though the Reserve Bank of New Zealand is inclined to support loose monetary policy, it's very likely that the key rate will be kept at 2.25% following the meeting on 9th June, which will have a positive effect on NZD quotes.
Out of today's news releases, pay attention to US indicators that will be published at 15:45 and 16:00 (GMT 2): the Markit PMI and ISM's business activity index that asses the manufacturing performance; ISM's prices-paid index (an important indicator of the US economy general state); US construction spending in April. On the whole, the indicators are expected to grow, which will consolidate the US dollar if the forecasts prove to be correct; the US dollar will weaken if the indicators are worse than expected.
The dairy price index from Global Dairy Trade will be published after 4 p.m. The index has a strong effect on NZD quotes. The NZD/USD volatility is expected to be high during this period.