New Zealand’s trade deficit missed expectations in October, led by a strong surge imports. The trade deficit narrowed to 908m in October, which is more than the 642m deficit that the market was expecting. Also, September’s trade balance was revised lower to -1,367m. The annual trade balance fell into deficit territory for the first time this year at -107m.
The good news is that the surge in imports highlights some underlying strength in domestic demand. Imports jumped 4.94bn, more than an expected 4.60bn. This bodes well for the outlook of consumer demand and the broader performance of the economy. However, the other side of the trade equation isn’t as encouraging. While exports beat expectations this time around (4.03bn vs. 3.85bn), they are being hampered by a still hill NZD, softened global dairy demand and the lagging effects of falling commodity prices.
Concerns about NZ’s dominant export market and the possibility of persistent annual deficits overwhelmed any mildly positive sentiment that came from the strong import numbers. The data didn’t hit NZD too hard but the kiwi did sink, ending a strong rally in NZDUSD overnight that was helped by a sell-off in AUDNZD. From here we’re watching an important short-term resistance zone in NZDUSD around 0.7900. It’s also worth keeping an eye on AUDNZD as the pair seems to be a focal point for AUD and NZD traders at the moment.
Source: FOREX.com
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