The market for the Kiwi has been relatively subdued at the start of the week with much of the focus on the pound and the hard-Brexit concerns that have given way to a phase of risk aversion once again in Global markets.
However, focus will soon turn to New Zealand and the correlation between the kiwi and global dairy prices. We have seen a slump in global demand of late, but as the NZ Herald reports, "Futures market trading is pointing to a mild improvement in dairy prices at this week's GlobalDairyTrade auction after a surprisingly weak start to the year."
The consensus of world dairy prices for the year ahead is that production in decline should be supportive while supply is speculated to continue to contract in major producing countries, except the US where there is a strong domestic demand for butter, along with a range of commodities as a whole.
"Whole milk powder prices look likely to improve a little after dropping 7.7 per cent at the previous sale in what was later seen as a rebalancing between the main products on offer," explained Jamie Gray, a business reporter for the NZ Herald.
NZD/USD 1-3 month:
Analysts at Westpac expect the bird to move lower to 0.6800. "The US dollar has had an impressive rise since the US election and has potential to rise further during the months ahead. The Fed’s assertive tightening projections plus US fiscal expansion should maintain upside pressure on US interest rates and the US dollar. Against that, the NZ economy is strong and dairy prices have risen, but these forces are subservient to the US dollar’s trend."
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