NZD: Kiwi showing signs of trouble after weak PMI data
Eamonn signalled the extent of the weakness in the NZD PMI data last week on June 13 with the headline of 50.2 marking the lowest overall activity since December 2012. The production sub levels were even worse, at 46.4, recording its lowest value since since April 2012. This week we have NZD GDP data out on Thursday June 19 and this is going to be a key data point to signal the next rate move out of the RBNZ.
Last rate meeting Governor Orr stated that , 'a lower OCR now is most consistent with achieving our objectives and provides a more balanced outlook for interest rates'. Early in June the Reserve Bank of New Zealand assistant governor Christian Hawkesby said in a speech delivered in Tokyo on May 30 (but released by the central bank later) that, "Our central view is that New Zealand's interest rates will remain broadly around current levels for the foreseeable future. " He went on to say that, "However, we need to be ready to adapt to changing conditions, to meet our objectives even when confronted with unforeseen developments,"
The weak PMI data and a miss on the GDP numbers will be those 'changing conditions' Mr Hawkesby is looking for. A GDP miss this week and the market will begin to price in for the RBNZ to follow the RBA on a projected series of rate cuts resulting in NZD weakness post data release. Another event, aside from the Fed meeting, to watch closely for the week.
