The NZD/USD pair dropped to the lowest level this year after New Zealand released weak economic data. Yesterday, the country reported a widening trade imbalance after imports soared while exports declined. In the last quarter, the seasonally adjusted current account deficit was $3 billion which was the largest account since 2008. This number was 2.8% of the GDP compared with the 7.8% peak in 2008. Imports increased as people and companies increased their purchases of petroleum and machinery. In the quarter, exports fell by 5.9% from the Q4. This was also contributed by the lower dairy prices and fall in volumes of meat exports.
Earlier today, the country announced the Q1 economic growth that met expectations. However, they were lower than the previously-reported data. In the quarter, the economy expanded by 0.5%, which was lower than Q4’s 0.6%. On an annual basis, the economy grew by 2.7%, which was lower than the 2.9% recorded in the fourth quarter.
At the industry level, 13 out of the 16 industries tracked showed some progress. Agriculture was up by 0.4% after a 2.8% decline in Q4 which was contributed to a rebound in milk prices. Construction fell by 1.0% but was still higher by 1.4% in the year. Consumer spending, – a major contributor to GDP – was flat in the quarter. The slower GDP growth was also attributed to the decline in exports and increase in imports.
The pair has reached 0.6828 which is the lowest level this year. The weak economic data reduce the chances for the RBNZ to hike interest rates any time soon. At the same time, the Fed is committed to increase rates two more times this year. This means that the pair could continue moving lower.
The pair’s RSI is currently at the 30 level and the pair is trading below the 21 and 42-moving averages. In the immediate short term, the pair could see a false reversal where it moves higher. In this, traders should watch out for the 0.6890 level after which the downward momentum can continue.