Coming up tonight at 22:45 if you are in Europe, or 16:45 on the East Coast, we could see some moves in NZD pairs due to the release of the electronic card transactions during January.
While it’s not one of the major monthly data releases, it has frequently moved the currency, and there are some special circumstances this time around. Here are some things to keep in mind ahead of the release.
Why This Data Matters
Electronic Card Transactions tracks the change in the total amount of purchases made by card, be it credit or debit.
This includes both domestic and foreign cards, which is significant given New Zealand’s reliance on tourism. The data is seasonally adjusted, also because of the impact of tourism.
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About 60% of the Kiwi economy is measured with Electronic Card Transactions, so not only is it a good gauge of consumer sentiment, but it also gives us some insight into how the economy is doing as a whole.
Plus with the RBNZ interest rate decision and monetary policy statement expected the day after this release, the Electronic Card Transactions is the last bit of economic data we get before the important RBNZ event, making it worth examining.
What’s Been Going On
Despite the strong economic ties between Australia and New Zealand, the latter has mostly been escaping the economic concerns that have been haunting the land down under.
However, this makes investors extra on the alert to see if and when there is spillover. One of the early indicators of such a thing would be a drop in consumer confidence, which would manifest itself in a decrease in electronic card transactions.
The prior months’ release (covering December, a key month both for tourist arrivals as well as holiday spending) came in at a disappointing -2.3%, well below the 0.5% expected.
This was the worst performance since even before the sub-prime crisis. It was the second time in a row that this measure came in negative.
It’s not unusual for this data series to poke below zero, and then come back up again; it tends to be quite variable. Another factor to consider is that it is often revised with the release of the next month, so what might alleviate the situation is if December’s number is revised higher.
That seems to be the hope among analysts who are now expecting January electronic card transactions to come in at +0.5%, bringing the series back in line with long-term trends.
As far as market moves, a beat on expectations in this data series is generally positive for the NZD. But should it come in below 0%, it would mark the third time in a row doing that, and it’s likely to weaken the kiwi.
We should note that consumer confidence data for New Zealand is published only every quarter, and the last iteration came in quite positive.
We still have to wait another two months before we get the next data release, and that might help understand whether the divergence between consumer confidence and consumer spending is just a fluke, or if there is an underlying issue that requires attention. After all, unemployment bumped up during January, in the middle of the summer – despite tourist arrivals being up 7.1% year over year.
In the short term, however, traders will more likely be on hold for the RBNZ.