NEW ZEALAND: Whole Milk Price Falls Continues, Further Terms Of Trade Risk
Overnight, the whole milk powder auction (held around twice monthly) saw further weakness (via Global Dairy Trade). We fell to $3452/ton from $3503/ton at the prior auction earlier in Nov. This is lows in the whole milk price auction result back to Sep last year. The chart below overlays the auction price against the Citi NZD terms of trade proxy. Fresh downside in whole milk prices is adding to downside risks to the terms of trade outlook, all else equal. NZD/USD has had a positive correlation with the Citi terms of trade proxy in recent months, although has outperformed (at the margins) the recent downturn.
Fig 1: Whole Milk Price & Citi NZD Terms Of Trade Proxy
Source: Bloomberg Finance L.P./Global Dairy Trade/MNI
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
ASIA: Coming Up in Asia Today
| 0300GMT | 1000HKT | 1200AEDT | Chia 1-Year Loan Prime Rate |
| 0300GMT | 1000HKT | 1200AEDT | China 5-Year Loan Prime Rate |
| 0330GMT | 1030HKT | 1230AEDT | China New Home Prices MoM SEPTEMBER |
| 0330GMT | 1030HKT | 1230AEDT | China Used Home Prices MoM SEPTEMBER |
| 0400GMT | 1100HKT | 1300AEDT | China GDP YoY 3Q |
| 0400GMT | 1100HKT | 1300AEDT | China GDP YTD YoY 3Q |
| 0400GMT | 1100HKT | 1300AEDT | China GDP SA QoQ 3Q |
| 0400GMT | 1100HKT | 1300AEDT | China Retail Sales YoY SEPTEMBER |
| 0400GMT | 1100HKT | 1300AEDT | China Retail Sales YTD YoY SEPTEMBER |
| 0400GMT | 1100HKT | 1300AEDT | China Industrial Production YoY SEPTEMBER |
| 0400GMT | 1100HKT | 1300AEDT | China Industrial Production YTD YoY SEPTEMBER |
| 0400GMT | 1100HKT | 1300AEDT | China Fixed Assets Ex Rural YTD YoY SEPTEMBER |
| 0400GMT | 1100HKT | 1300AEDT | China Surveyed Jobless Rate SEPTEMBER |
| 0400GMT | 1100HKT | 1300AEDT | China Property Investment YTD YoY SEPTEMBER |
| 2300GMT | 1100HKT | 1300AEDT | Chia Residential Property Sales YTD YoY SEPTEMBER |
source: Bloomberg Finance LP / MNI
NZD: Within Recent Ranges, CPI Due Shortly, Nov 25bps Cut Fully Priced
NZD/USD tracks within recent ranges in early Monday dealings (last 0.5730/35), as markets await the Q3 CPI due shortly. If we see a downside surprise, which strengthens the bias around further RBNZ easing, recent lows at 0.5683 could be targeted. A break sub this level could bring the 0.5600 downside level into focus, last tested in April of this year.
- Conversely, an upside surprise may see recent highs near 0.5760 challenged, while the 20-day EMA is near 0.5775/80, beyond that the 50-day EMA is near 0.5840. To challenge this level we may need to see a meaningful upside surprise that shifts market thinking on the RBNZ outlook (i.e. shifting off the Nov 25bps cut or further moves into 2026).
- For today's print, the RBNZ has been expecting it to reach the top of its 1-3% band since its August forecast update and 3% seems to be where economists project it to print. Underlying CPIs are expected to remain within the top half of the band though. A 25bp rate cut is expected in November but if inflation prints materially below consensus then 50bp may be considered. The easing outlook may become clouded if inflation appears more persistent though.
- From Friday, NZD was little changed despite the better equity tone as US President Trump dialled down his rhetoric around China tariffs. In an interview with Fox News, Trump stated that 100% tariffs on top of what is in place already is "not sustainable", while adding that "We have to have a fair deal" with China.
- The AUD/NZD cross sits at 1.1325/30 in early Monday dealings, supported on dips under 1.1300, with the AUD benefiting more so from Trump's comments on Friday. This is close to the 20-day EMA support point.
AUD: A$ Outperforms As Trump Moderates US Trade Threat & Equities Rally
Commodity currencies outperformed on Friday as risk appetite improved following comments from US President Trump that is was “not sustainable” to add 100% tariffs on the ones that China already faces. This drove US equities higher but also a stronger Aussie. AUDUSD fell to 0.6444 early in European trading and then trended higher reaching 0.6502 but was unable to hold the break above 65c. It is currently around 0.6496. The USD index was flat.
- AUDUSD traded below initial resistance at 0.6551, 50-day EMA, and held above initial support at 0.6440, 14 October low. A break below 0.6440 would cancel the reversal signal and reinstate a bear threat. During the recent bear leg, moving average studies have continued to highlight a dominant medium-term uptrend.
- AUDNZD fell to 1.1278 but then picked up reaching 1.1345. It is currently around 1.1323. Q3 NZ CPI is released today which has a high correlation with Australian quarterly CPI which prints 29 October.
- AUDJPY rose 0.3% to 97.847, close to the intraday high, and has started today slightly lower at 97.67. AUDEUR was up 0.5% to 0.5574 after a low of 0.5507 and is currently around 0.5566. AUDGBP was 0.2% higher at 0.4838 and is at 0.4834.
- Equities were mixed with the Euro stoxx down 0.8% but S&P up 0.5%. Oil prices were higher with Brent +0.5% to $61.34/bbl. Copper was flat and iron ore around $104/t.
- There are no data or events in Australia today.
