21 Jul 2014
Strong NZD and dropping milk prices a cause for concern in New Zealand - ING
FXStreet (Łódź) - James Knightly from ING comments that the problems which New Zealand's economy faces currently, despite the raid growth and normalising of monetary policy, include the strength of the NZD and plunging milk prices.
Key quotes
"New Zealand looks set to be the fastest growing developed market economy in 2014 with the latest Bloomberg consensus survey projecting GDP growth of 3.5% this year and 2.9% next year."
"The RBNZ has hiked rates from 2.5% to 3.25% and is widely expected to do so again this week, but recent data has suggested that this is now a slightly closer call than thought just a couple of weeks ago, with some doubts raised about the prospect of further near-term policy tightening."
"While the growth data is strong, there are ongoing concerns about the strength of the New Zealand dollar."
"This is clearly hurting competitiveness, while New Zealand’s key export – dairy – is already coming under pressure from plunging prices."
"With rates moving higher, the currency continuing to strengthen and New Zealand’s main export coming under such pressure, the risks to the growth outlook are now moving to the downside."
"We think that after a 25bp rate hike on Thursday morning local time there will be a pause until the December meeting as the RBNZ assesses the impact of this year’s policy tightening."
"By this time we suspect other central banks will be starting to tighten (such as the Bank of England) or considering it (the Federal Reserve), which should ease some of the upward pressure on NZD."
"We see NZD/USD gradually easing through the second half of this year to 0.84 from 0.868 currently."
Key quotes
"New Zealand looks set to be the fastest growing developed market economy in 2014 with the latest Bloomberg consensus survey projecting GDP growth of 3.5% this year and 2.9% next year."
"The RBNZ has hiked rates from 2.5% to 3.25% and is widely expected to do so again this week, but recent data has suggested that this is now a slightly closer call than thought just a couple of weeks ago, with some doubts raised about the prospect of further near-term policy tightening."
"While the growth data is strong, there are ongoing concerns about the strength of the New Zealand dollar."
"This is clearly hurting competitiveness, while New Zealand’s key export – dairy – is already coming under pressure from plunging prices."
"With rates moving higher, the currency continuing to strengthen and New Zealand’s main export coming under such pressure, the risks to the growth outlook are now moving to the downside."
"We think that after a 25bp rate hike on Thursday morning local time there will be a pause until the December meeting as the RBNZ assesses the impact of this year’s policy tightening."
"By this time we suspect other central banks will be starting to tighten (such as the Bank of England) or considering it (the Federal Reserve), which should ease some of the upward pressure on NZD."
"We see NZD/USD gradually easing through the second half of this year to 0.84 from 0.868 currently."