Dairy prices drop — RBNZ to follow

Posted by

Things keep going wrong for NZ. Their stats office just halved the pace of recent growth, and the price of a key export has fallen 41% in the last year.

Last night’s Fonterra auction results showed a 6.4% decline in prices.

Prices have fallen ~20% in the prior ten weeks, and the NZD is down ~10%, meaning that NZD reciepts are down ~10%

The loss of income makes the RBNZ more likely to ease monetary policy – with commodity prices falling and the RBNZ lowering the OCR, the trade is to be short NZDUSD. This is NZD weakening for bad reasons (a weaker growth outlook) so it does not mean the RBNZ should refrain from lowering the OCR.

20120516-071256.jpg

Advertisements