The New Zealand Dollar had very similar price action to its Aussie cousin last week, though its peak on Wednesday came somewhat earlier during the day and the sell-off against the US Dollar on Friday was less marked; allowing the AUD/NZD cross to trade down on to a 1.06 ‘big’ figure by the New York close. Indeed, whilst AUD/USD fell to its lowest since Christmas, NZD/USD only eased back to the lowest in 10 days, closing in New York around 0.7215; around 1 ¼ cents below its midweek peak. This morning is Asia, the Kiwi has struggled to hold on to US 72 cents and a break through technical support around 0.7190 could open the way for a return to the 2018 low at 0.7080.
In economic data released this morning, New Zealand's Performance of Services Index experienced a slight slip in expansion levels during February with a 0.7 point drop to 55.0; but still just above its long-term average of 54.4. The fourth quarter GDP numbers out last week showed the service sector grew around 1.1% but on the evidence of the first two months of 2018, it seems the pace of expansion in Q1 may be somewhat slower. Indeed, local experts BNZ who co-produce the PSI have a preliminary estimate of 0.6% penciled-in for GDP.
On Thursday this week, the RBNZ Board meeting will be the last under the interim leadership of Grant Spencer. Incoming Governor Adrian Orr takes up his post on March 27th and the big focus of attention will be the new Policy Targets Agreement. In an interview last week, Finance Minister Grant Robertson said, “I understand the limits of monetary policy, so we want [the Reserve Bank] to be considering maximizing employment but, unlike a particular inflation target, we would not be seeking a particular employment target through monetary policy.” The current PTA between the Government and Central Bank outlines the RBNZ’s commitment to keep inflation between 1% and 3% on average over the medium term, with a focus on keeping future average inflation near a 2% target midpoint. The 2% target was added when Graeme Wheeler took over in 2012; mainly to signal a symmetry of tolerance around a mid-point but also to underscore that a number persistently just under 3% would not be a desired outcome. Before the RBNZ meeting, on Tuesday we get Westpac’s consumer confidence report and Wednesday brings the net migration numbers. The Kiwi Dollar opens in London this morning at USD 72 cents with GBP/NZD in the low 1.93’s.