FXStreet (Bali) - Mark Smith, Senior Economist and Sam Tuck, Senior FX Strategist, both part of the ANZ Research Team, note that the latest NZ GlobalDairyTrade auction results suggest that the recent market rally may have gotten a little ahead of itself.
Key Quotes
"Overnight saw prices from the GlobalDairyTrade auction fall 3.1% to an average of USD2,733 per MT. This is the first fall following four consecutive increases, and suggests the recent market rally may have gotten a little ahead of itself."
"The result was driven by weaker prices for milk powders. Prices for whole milk powder fell 4.6% to USD2,694 per MT, which was worse than implied by NZX futures despite the recent tailing off in the latter."
"Prices for skim milk powder were down 4.5%, with a chunky 11% fall for butter. At present prices remain consistent with Fonterra’s NZD4.60 per kg MS 2015/16 milk price forecast, but if predictions of an El-Nino event come into fruition, prices could move up sharply in the New Zealand summer months."
"While dairy is one of the weaker spots on the local landscape, today’s migration data is expected to reflect and reinforce the relative resilience of the New Zealand economy."
"Another net record net annual inflow could well be reached. When combined with low mortgage interest rates, its little wonder services sector sentiment is looking good."
"We continue to hold high hopes for the tourism sector, which has solid structural and cyclical supports, with the lower NZD underpinning visitor spending. The dairy sector is a key component of the local economy, but other parts matter too."
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