NZD/USD darts higher as New Zealand reports record surplus
- The NZD/USD pair rose after New Zealand reported record surplus as imports fell.
- According to New Zealand statistics office, the country's trade surplus jumped to $0.8 billion.
- The bureau will release the final reading of Q2 GDP data later today.
The NZD/USD pair is rising for the fourth straight day as traders react to the strong economic data from New Zealand. The pair is also rising because of the relatively weaker US dollar ahead of the Federal Reserve interest rate decision. It is trading at 0.6730, which is the highest it has been since September 3.
New Zealand surplus rises
New Zealand has succeeded in dealing with the coronavirus pandemic. The country of 5 million people has reported just 1,802 cases and 25 deaths. That is a contrast to Australia, which has recorded more than 26,000 cases and more than 800 deaths.
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According to Statistics New Zealand, the country experienced a sharp decline of imports and exports, leading to a record current surplus. The country’s adjusted current surplus came in at $0.5 billion in the second quarter. That was the biggest increase since the series started in 1971. In the first quarter, the country had a net deficit of more than $1.4 billion.
For starters, a current account surplus happens when the value of a country’s earnings from other countries from exports, income and investments is larger than the expenses. It happened mostly because New Zealand spent less money on crude oil and a sharper decrease in tourism revenue.
As a result, the country exports fell by $0.8 billion while imports declined by more than $3.2 billion. The report said:
“Crude oil imports were much lower than usual from April to June 2020, with much less travel by road and air. Oil imports fell to zero in July, just after the end of the June 2020 quarter.”
New Zealand record service deficit
At the same time, the country recorded the deepest service deficit since 1988. That is because it exported services worth $3.9 billion in the second quarter, down from $2.5 billion in Q1. That was mostly because of a sharp decline of travel services. Imports of services also fell by $1.8 billion to $4 billion.
Later today, the NZD/USD will react to New Zealand’s second-quarter GDP data. According to Reuters, the median forecast by economists is that the economy contracted by 12.8% in the quarter following a 1.6% drop in the first quarter. That will put the country in the first technical recession for the first time since 2010. Still, that decline will be better than the US and UK decline of 32% and 20%. In a statement, an analyst at Westpac said:
“Market forecasts have clearly been trending towards a smaller negative number in recent weeks, as the data showed that the economy bounced back readily from the lockdown.”
NZD/USD technical outlook
The daily chart shows that the NZD/USD pair has been in an upward trend in the past few days. It has risen from last Wednesday’s low of 0.6597 to a high of 0.6730. The price is above the 50-day and 100-day moving averages. It is also above the ascending trendline that is shown in green. Also, the price has formed an ascending trendline. Therefore, the price is likely to continue rising as bulls attempt to move above 0.6782.