Forex Flash: NZ faces clouded and milky outlook – UBS

FXstreet.com (Barcelona) - In light of the recent focus on commodities and price actions, it’s worth noting that New Zealand's main export is dairy. A case can be made that the recent surge in prices is temporary – after all local drought conditions are now finally subsiding. However, “even if milk prices decline from here, there appears to be worse in store for Australia given its dependence on 'hard' commodity exports – the prices of which have been falling for several weeks.” warns Research Analyst Gareth Berry at UBS.

Indeed, iron ore is Australia's single-biggest export, and the price upswing over the past 9 months appears to have run its course and may have already gone into reverse.

Looking beyond commodities, booming NZ house prices have already triggered hawkish rhetoric, culminating in a shift towards a slight tightening bias at last week's RBNZ policy meeting. “A watchful eye is also being kept on the accelerating post-earthquake reconstruction effort, given its potential to boost inflationary pressures more generally.” Berry adds.