NZ Trade Deficit Another Record, with Focus Shifting to Draghi and the EUR

Earlier in the Day:

Economic data released through the Asian session this morning was limited to September trade data out of New Zealand, leaving the markets to pick up the pieces from the sell-off in the U.S equity markets, as risk sentiment shifted once more over concerns of an economic slowdown, with the Eurozone’s private sector prelim October PMI numbers having provided some troubling numbers on Wednesday.

For the Kiwi Dollar, the September trade deficit hit a new monthly trade deficit record, with the monthly deficit widening from a revised NZ$1,470m to NZ$1,560m, according to NZ Stats.

• Record imports led to the largest ever goods trade deficit, with September’s record the 2^nd in a row, following August’s widening.
• Imports rose by 19% (NZ$930m) compared with the same month last year, to hit NZ$5.9bn, the highest value for total imports on record.
• The jump in imports was attributed to a rise in petroleum and products imports, which rose by 87% (NZ$366m) from September last year, with crude oil leading the way, up NZ$278m followed by fuels, which increased by NZ$86m.
• Imports of aircraft also contributed, rising by NZ$266m.
• Exports rose by 14% (NZ$536m) to reach $4.3bn, a 118% (NZ$188m) increase in the export of Kiwi fruits the key contributor, with both higher volumes and prices driving the increase.
• Year-on-year, the trade deficit widened from a revised NZ$4,790m to NZ$5,190m.

The Kiwi Dollar moved from $0.65242 to $0.65236 upon release of the figures, before easing to $0.6523 at the time of writing, down 0.09% for the session.

Elsewhere, the Aussie Dollar was on a tear, up 0.2% to $0.7074, while the Japanese Yen stood at ¥111.96 against the U.S Dollar at the time of writing, a gain of 0.27% for the session.

In the equity markets, there were no surprises early on, the Nikkei tumbling by 3.33% at the time of writing, with the ASX200 and Hang Seng not far behind, down by 2.25% and by 1.91% respectively, the late sell-off in the U.S spilling over to the Asian session, with mining stocks amongst the biggest losers on the ASX200 early on, while oil and tech stocks were amongst the biggest sliders on the Hang Seng.

The Day Ahead:

For the EUR, following some quite dire prelim PMI numbers out of the Eurozone on Wednesday, economic data scheduled for release this morning includes consumer and business confidence numbers out of Germany and jobseeker figures out of France.

While we will expect both the consumer and business confidence numbers out of Germany to provide some direction for the EUR, focus will be on today’s ECB monetary policy decision and the all-important Draghi press conference, where the EUR is likely to find plenty of price action.

With economic indicators suggesting dark clouds overhead and the Italian Coalition government clashing with Brussels, following the EU Commission’s rejection of the coalition government’s budget plans, there will be plenty of uncertainty ahead of the press conference. Will the ECB stand by its plan to bring to an end the asset purchasing program by the end of the year, when considering recent economic indicators and will Draghi be willing to stand out and state that the ECB would purchase Italian government bonds, in spite of the coalition government’s flouting of EU laws?

Dovish with no details seems to be the most plausible outcome, all things considered, but it wouldn’t be the first time that Draghi blind sides the markets.

At the time of writing, the EUR was up 0.0.16% to $1.1410, today’s stats, the ECB and geo-political risk the key drivers.

For the Pound, there are no material stats scheduled for release through the day, leaving focus on Brexit and news from British PM Theresa May’s session with the 1922 Committee on Brexit, with fears of a possible vote of no confidence contributing to the Pound’s demise on Wednesday.

Early reports of a united front will provide some support for the Pound and, while it may not be as united as some suggest, few are envious of May’s position at the helm that should ease the fear. Brexit chatter is also expected to influence through the day should there be any progress, or lack of, on the Irish border.

At the time of writing, the Pound was up 0.10% to $1.2894, with Brexit the key driver.

Across the Pond, economic data scheduled for release includes the weekly jobless claims figures, September’s trade and pending home sales figures and, of greater significance, durable goods orders.

The latest manufacturing PMI numbers out of the U.S suggest that the sector is holding up well in spite of the ongoing trade war with China and some weakening in economic activity in the Eurozone, with new order growth driving the headline PMI number, stemming from domestic demand as new orders from abroad remained close to stagnation. The key number will be the core durable goods orders, which is forecasted to be Dollar positive.

Outside the stats, FOMC member chatter will unlikely have too much influence, with FOMC member Clarida speaking, while any chatter from the Oval Office and Rome will need to be considered through the day.

At the time of writing, the Dollar Spot Index was down 0.17% to 96.269.

For the Loonie, there are no material stats scheduled for release through the day, leaving the markets to consider Thursday’s press conference which was on the more hawkish side, with policy makers making it clear that rates must continue to rise to neutral to support the Bank’s object on inflation, though much will depend upon the economic indicators in the months ahead on how quickly the Bank moves forward on rates.

The Loonie up 0.23% to C$1.3027 against the U.S Dollar at the time of writing, the Asian markets responding to the overnight rate hike and hawkish BoC press conference.