The Global Dairy Trade event today showed a -0.6% decrease in milk prices.
While this was expected to (once again!) hit the NZD, the curious thing is that it did weaken, then it rapidly moved back up, even surpassing the levels prior to data release.
I believe the explanation for this is the fact that many who follow the NZD milk trade know that the price of dairy is naturally hedged and if historical data is any indication, in comparison to prices this time last year, the prices are relatively better. Those who trade NZD seriously are without a doubt, aware of this fact.
Hence, the logical conclusion is that the rapid movement just a few minutes ago is merely the attempt by some well funded traders to profit on the initial volatility that precedes and accompanies data release.
Anyway, those who wish to learn more about this milk price hedge can read about here
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