NZD/USD Fundamental Forecast – September 2, 2016

The NZD/USD gained 7 points after Chinese manufacturing PMI printed above the 50 line giving markets a sigh of relief. The kiwi is trading at 0.7256 as the greenback remained flat. Caixin manufacturing also remained above the 50 line but printed a drop lower than expected but the official manufacturing PMI soared well above expectations printing at 50.4. There was no local data to support the currency.  The official and unofficial PMI Chinese manufacturing have printed with different outcomes, but the overall message continues to be one of slightly better recovery in the nation's industrial. The official Purchasing Managers' Index compiled by the government's National Bureau of Statistics found activity rising to 50.4, up from 49.9 in July.
A reading above 50 indicates expanding activity, while below represents contraction. The official survey mainly focuses on large state-owned enterprises. The unofficial Caixin PMI - which has a greater representation of private enterprise - fell from 50.6 to the no-change mark of 50 in August.
Dairy prices in NZ seem to be holding steady which is support the currency, while lowering the GDP exports of New Zealand. Data show the terms of trade - that is, the quantity of imports that can be bought with a given quantity of exports - declined by 2.1 percent in the three months to June, compared with a 4.1 percent rise in the previous quarter.
Export prices declined 1.9 percent, led by a 7.1 percent fall in dairy products. The government said overall export prices as well as dairy prices were at their lowest level since the December 2009 quarter. But volumes surged to their highest level since the series began in 1990 as exporters shipped more dairy products overseas, as well as meat, logs and fruit.
The ANZ bank's survey for August showed a net 15.5 percent of companies were optimistic about the coming year, which was fractionally lower than July. But businesses were slightly more confident for themselves, with nearly 34 percent expecting an improvement, compared with 31.4 percent in July.
The building and service sectors were the most confident, but agricultural based businesses trailed the survey although they were much less pessimistic. ANZ chief economist Cameron Bagrie said confidence remained close to a 20 month high.

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