NZD/USD Fundamental Analysis August 7, 2013 Forecast

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Updated: Aug 22, 2015, 07:00 GMT+00:00

Analysis and Recommendation: The NZD/USD is trading at 0.7836 gaining 13 points as the US dollar weakens and the economy worries about the dairy ban from

NZD/USD Fundamental Analysis August 7, 2013 Forecast

Analysis and Recommendation:

The NZD/USD is trading at 0.7836 gaining 13 points as the US dollar weakens and the economy worries about the dairy ban from China after bacteria was found in the exports from NZD. The discovery by dairy leader Fonterra of a bacterium that can cause potentially fatal food poisoning in ingredients sold to eight countries exposes New Zealand’s vulnerability to food safety scares and the fragility of the clean, green image underpinning its farming- and tourism-based economy. Agricultural exports, including dairy, meat, fruit and wine, command high premiums internationally thanks to New Zealand’s reputation as a producer of safe, natural and high-quality food. Fonterra is our largest exporter and they’re completely intertwined with New Zealand’s image and also they’re the absolute biggest benefactor of the ‘100% Pure’ brand.

Prime Minister John Key, who has been previously criticized for saying the 100% pure marketing should be taken with a pinch of salt, said New Zealand would always be reliant on dairying, with its natural competitive advantage and global demand rising. “The right answer is not for New Zealand to sell less dairy. The right answer is for New Zealand to be absolutely sure that the safety standards are met,” he said today according to an article in Reuters.

Ten years ago at the height of a foot and mouth epidemic in Europe, the Reserve Bank of New Zealand modeled the impact of a limited outbreak of the livestock disease – estimating an immediate 20 percent hit to the currency, as well as a 12 percent fall in exports and an 8 percent hit to GDP in two years. The New Zealand economic indicators report released today, has not taken into account this most recent problem but at the end of July, the report predicted moderate GDP growth expected in the June quarter, with downside risks from drought. Business optimism signals a pick-up in activity in the second half of the year Inflationary pressures set to increase. This might change depending on the marketing and PR spin and China’s ban on NZ dairy products.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports.

Economic Data August 6, 2013 actual v. forecast

Cur.	Event	Actual	Forecast	Previous
AUD	House Price Index (QoQ)	2.40%	1.00%	0.80%
AUD	Trade Balance	0.60B	0.80B	0.51B
AUD	Interest Rate Decision		2.50%	2.75%