NEW ZEALAND: Q1 Current Account Narrows On Strong Goods Exports
The Q1 non-seasonally adjusted current account deficit narrowed substantially to $2.32bn from a downwardly-revised $6.80bn but seasonally adjusted it was similar to Q4 at $5.55bn. This brought it to 5.7% of GDP down from 6.1%, the lowest since Q3 2021 and 3.5pp less than the Q4 2022 peak. The trade deficit narrowed to $1.22bn from $1.63bn, the lowest since Covid-impacted Q2 2021, due to a strong pickup in goods exports. Robust shipments in Q1 are likely to support GDP growth when it is released on Thursday.
NZ current account % GDP
Source: MNI - Market News/LSEG
- Goods exports rose 11.9% q/q in Q1 to be up 18% y/y driven by agricultural products and higher prices for dairy and meat. Imports rose 5.5% q/q to be up 6% y/y driven by intermediate items including processed fuels. Durable consumer goods also saw a robust rise.
- The services balance returned to a deficit in Q1 after a small surplus in Q4, as exports fell 5.9% q/q due to lower visitor expenditure while imports rose 2.4% q/q driven by transport services.
- The net international investment liability position narrowed to $212.2bn in Q1 from $213.6bn, as the value of assets fell by less than liabilities due to global market uncertainty.
NZ goods & services exports vs imports y/y%
Source: MNI - Market News/LSEG
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AUSTRALIA: RBA Decision This Week Including Updated Projections
The focus of the week will be on the RBA which is widely expected to cut rates 25bp to 3.85%. A statement on monetary policy including updated staff forecasts will also be published with the decision at 1430 AEST followed by Governor Bullock’s press conference at 1530 AEST. Deputy Governor Hauser speaks on Thursday at 1830 AEST about his trip to China.
- Data releases are minimal this week. Westpac’s April leading index is released on Wednesday. It fell in March and was showing signs of an impact from US trade policy announcements. The series leads detrended growth by three to nine months.
- Preliminary May S&P Global PMIs print on Thursday. They are signalling slight growth in activity across both services and manufacturing.
JGBS: Futures Weaker Overnight On Friday, US Tsys Hit By Moody’s Downgrade
In post-Tokyo trade on Friday, JGB futures closed weaker, -12 compared to settlement levels, after the cash US 10-year yield ranged from 4.3863% to 4.4770%, closing around 4.47% (+5bps).
- US tsy 10-year futures (TYM5) reacted in early Asia-Pacific dealings to late Friday's news that Moody's Ratings downgraded the US credit score.
- Bloomberg - "Moody's Ratings downgraded the US credit score to Aa1 from Aaa due to an increase in government debt and a higher interest burden."
- "Asked about the Moody's Ratings downgrade of the country's credit rating Friday during an interview on NBC's Meet the Press with Kristen Welker, Bessent said, "Moody's is a lagging indicator - that's what everyone thinks of credit agencies.""
- "The move follows downgrades by Fitch Ratings and S&P Global Ratings, with Moody's citing a decline in fiscal metrics that can no longer be counterbalanced by the US' economic and financial strengths."
- Today, the local calendar will see the Tertiary Industry Index alongside 1-year supply.
- The G7 will be holding a meeting from the 20th to the 22nd, there will be attention on any discussion between the US and Japan, particularly if foreign exchange rates are discussed concerning the tariffs.
GOLD: Gold Finishes Week Down, Higher US Yields
Gold prices fell 1.1% on Friday to $3203.65/oz pressured by higher US yields after a low of $3154.60 to be down 3.6% on the week and 2.6% in May. Bullion has been trending lower since its peak on May 6 at $3435.62. The USD index rose 0.2%.
- Gold has trended down since May 6 as a corrective cycle takes place. Friday’s low was below key support at $3202.0, May 1 low, but the metal is currently trading just above this level at $3242.40. A clear break would open up $3085.0, a retracement point. Initial resistance is at $3265.4, 20-day EMA.
- It reached a month low of $3120.98 on Thursday, which was a breach of the 50-day EMA at $3168.0, but it then finished higher on the day.
- April activity data for China are released later today.
