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- The New Zealand dollar is losing ground against the US dollar after the RBNZ released its latest inflation expectations.
- A central bank report suggests that interest rates are likely to remain subdued in the near future.
- NZD/USD is in a long-term bearish trend, with comments from Fed Chair Powell and other governors as possible near-term implications.
He New Zealand Dollar (NZD) withdrew from United States Dollar (USD) On Wednesday, market sentiment worsened following a vaguely pessimistic outlook for the global economy. As New Zealand is a major commodity exporter, a slowdown in global growth will not help its currency.
Kiwis were also not helped by the Reserve Bank of New Zealand’s (RBNZ) inflation report tonight, which showed a widespread view that prices could fall as a result of the economy slowing and falling. Demand for goods and services.
Daily Market Summary: New Zealand Dollar Delivers Falling Price Expectations
- The New Zealand dollar is trading lower against the US dollar, reflecting a broadly risk-averse tone in markets on Wednesday.
- The Kiwi weakened further against the US dollar after the RBNZ reported inflation expectations for the third quarter. Respondents expected inflation to drop to a lower level within a year than the previous report. A year earlier, they had seen inflation at 3.60%, down from 4.17% in the second quarter report.
- New Zealand’s real inflation rate fell to 5.6% in the third quarter, down from 6.0% in the previous quarter, Statistics NZ reported.
- Low inflation expectations mean the RBNZ is unlikely to raise interest rates, with the headline rate currently at 5.50%. Higher interest rates tend to strengthen the currency by increasing capital inflows from foreign investors seeking higher returns. This explains why the report may have had a negative impact on NZD/USD.
- The RBNZ reported two-year inflation expectations fell to 2.76% from 2.83% previously.
- The current consensus is that the US Federal Reserve Bank (Fed) is unlikely to raise interest rates. With the fed funds rate currently at 5.25-5.50%, traders have little incentive to borrow NZD or USD and invest in the other, known as a “carry trade”.
- The next major event on the calendar for the US dollar is a speech by Federal Reserve Chairman Jerome Powell at 14:15 GMT and comments from several federal governors later this afternoon.
New Zealand Dollar Technical Analysis: NZD/USD Retrace Charts
The NZD/USD pair (the number of US dollars one New Zealand dollar can buy) fell for a third day in a row on Wednesday, trading at 0.5921 at press time. The pair is pulling back after reaching a high of 0.6002 on November 6.
New Zealand Dollar vs. US Dollar: 4-hour chart
The pair has found support at the 50-day SMA (see chart below). It is in a short-term uptrend, which favors a recovery.
A decisive break above the November 3 high would reaffirm near-term upside, with an October high target at 0.6055.
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New Zealand Dollar vs US Dollar: Daily Chart
However, the trend is stable on both the daily and weekly charts, indicating strong bearish potential.
A break below 0.5884 would signal a continuation of the broader downside towards the October low at 0.5773, in line with the dominant longer-term bearish trend seen on higher time frames.
Bulls need to break the October high of 0.6055 to change the outlook on the intermediate chart to positive and suggest the possibility of a new uptrend.
New Zealand Dollar Frequently Asked Questions
The New Zealand Dollar (NZD), also known as the Kiwi, is a widely traded currency among investors. Its value is largely determined by the health of the New Zealand economy and the policy of the country’s central bank. However, there are some peculiarities in moving NZD. The evolution of the Chinese economy tends to move Kiwis, as China is New Zealand’s largest trading partner. The bad news for the Chinese economy is that New Zealand will reduce the country’s exports, which will hurt the economy and therefore its currency. Another factor that moves the NZD is dairy prices, as the dairy industry is New Zealand’s main export. Higher milk prices increase export earnings, contributing positively to the economy and thus to the NZD.
The target of the Reserve Bank of New Zealand (RBNZ) is to achieve and maintain an inflation rate of 1% to 3% over the medium term. To do this, the bank sets appropriate interest rates. When inflation is too high, the RBNZ raises interest rates to cool the economy, but this move raises bond yields, making investors more attractive to invest in the country and boosting the New Zealand dollar. Conversely, low interest rates weaken the NZD. The so-called rate differential, or what rates are in New Zealand or compared to rates set by the US Federal Reserve, can play an important role in the movement of the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assessing the state of the economy and can affect the appreciation of the New Zealand Dollar (NZD). A strong economy in terms of high economic growth, low unemployment and high confidence bodes well for the NZD. High economic growth attracts foreign investment and this economic strength may encourage the Reserve Bank of New Zealand to raise interest rates if it is accompanied by high inflation. Conversely, if economic data is weak, the NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during periods of risk appetite or when investors perceive overall market risks as low and are optimistic about growth. This usually translates into a more favorable outlook for commodities and so-called “commodity currencies” such as the Kiwi. Conversely, the NZD weakens during periods of market turbulence or economic uncertainty as investors tend to sell riskier assets and flee to more stable havens.
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