The Eurodollar rallied against the kiwi dollar in the Asian session yesterday following the report of lower than anticipated trade surplus data by Statistics New Zealand.
However, the unexpected drop in the German business climate index, as reported by the ifo institute in the European session, enabled the New Zealand dollar to regain most of the lost ground. Overall, in the past 24 hours, the EUR/NZD pair rallied from a low of 1.6845 to a high of 1.6940.
According to the New Zealand statistical agency, trade surplus declined to N$261 million in June, from N$489 million in the prior month. Economists had anticipated a trade surplus of N$297 million for the reported period.
With 31% (or N$384 million) growth, milk powder, butter, and cheese led the increase in total export values. The top export destinations were China (up N$540 million to N$1.90 billion) and the EU (up N$69 million to N$395 million).
With 166% (N$610 million) rise, vehicles, parts, and accessories led the imports. Also, imports of mechanical machinery and equipment increased 37% (or N$218 million). Imports from the EU increased N$265 million to N$918 million. Likewise, imports from China rose by N$180 million to N$1.20 billion.
Compared with June 2020, goods exports increased 17% or N$871 million to N$6 billion in June 2021. Likewise, goods imports rose by 24% or N$1.10 billion to N$5.70 billion.
On a q-o-q basis, goods exports rose by 9.5% or N$1.40 billion to 16 billion in the June 2021 quarter. Similarly, goods imports increased 5.6% or N$875 million to N$16.60 billion in the June 2021 quarter. Overall, the June 2021 quarter recorded a trade deficit of N$601 million.
Also, compared with the year ended June 2020, goods exports increased by 0.3% or N$180 million to N$60.40 billion in the year ended June 2021. Also, during the same period, goods imports fell by 1.1% or N$699 million to N$60.70 billion. Overall, the annual goods trade deficit was N$252 million, far below the N$1.10 billion deficit recorded in the year ended June 2020.
According to Germany’s Leibniz Institute for Economic Research, the ifo business climate index unexpectedly declined to 100.80 in July, from 101.70 in June. Economists had anticipated an increase in the business climate index to 102.30.
The current situation index increased to 100.40 in July, from 99.70 in the prior month. The reported reading reflects the highest level since August 2018. However, the expectations index fell to 101.20 in July, from 103.70 in June. Issues related to the supply chain and worries over the rising number of COVID-19 infections are harming the German economy.
Specifically, the business climate index in the manufacturing sector inched down to 27.40, from 28.50. Likewise, the service sector posted a decline to 19.80, from 22.50. Also, the trade sector reported a drop of 15.80, from 17.80. However, the construction sector recorded an increase to 5.70 in July, from 4.20 in June.
The weak economic data from both Europe and New Zealand is expected to keep the EUR/NZD pair range-bound in the short term.
The historical price chart indicates that the EUR/NZD pair is rising after testing the support at 1.6845. The next minor resistance is anticipated only near 1.6975. Additionally, the currency pair is trading above its 50-day moving average, while the stochastics indicator is rising towards the bullish zone. Therefore, we are anticipating the currency pair to remain in an uptrend in the near term.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
