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New Zealand dollar gains on positive risk sentiment

Thursday 17 March, 2022

Daily Currency Update

The New Zealand dollar opens slightly stronger this morning when valued against the greenback.  The New Zealand dollar rose by 0.40% against the US dollar in the wake of the Federal Open Market Committee (FOMC) raising interest rates for the first time since 2018. The kiwi recorded an advance of a third of a percent against sterling, with the pound to New Zealand dollar exchange rate now quoting at 1.9242. On the data front yesterday we saw the release of NZ Current Account for the December quarter 2021 . New Zealand’s annual current account deficit widened to 5.8% of GDP in December, compared to 4.6% in September. Similarly, on a quarterly basis, the deficit widened by $1.8bn in seasonally-adjusted terms to $6.5bn. The annual deficit of 5.8% of GDP was wider than both our own and the market’s forecast. A wider than expected investment income deficit accounted for the surprise. Looking ahead and today and all eye will be on NZ quarterly Gross Domestic Product (GDP) where we expect a 3.8% rise for the quarter. On Friday we will see the release of the countries quarterly Gross Domestic Product (GDP) which is forecast to rise by 3.2%. From a technical perspective, the NZD/USD pair is currently trading at 0.6836. We continue to expect support to hold on moves approaching 0.6743 while now any upward push will likely meet resistance around 0.6857.

Key Movers

The key movement overnight the Federal Open Market Committee (FOMC) released its policy update and lifted the Fed Funds rate by 25bps to a range of 0.25-0.5%, as widely anticipated and marking the first rate hike since 2018. The Federal Open Market Committee (FOMC) is projecting six more rate rises this year. Ahead of the Fed announcement, markets were trading with a positive risk tone, supported by optimism on eventual peace in Ukraine and the Chinese government’s support for the equity market. On the economic data front, US retail sales were weak in February, with the ex-autos and gas core figure falling 0.4% m/m, well below expectations, but this followed an upwardly revised surge higher in January.  The net result will be a strong Q1 figure overall, even if March is soft as well, and the Atlanta Fed’s GDP which now estimate lifted from 0.5% to 1.2% after adding in the retail sales report. Homebuilder sentiment measured by the NAHB housing market index underwhelmed, falling to a six month low of 79, and this should continue to fall on the back of rising mortgage rates.

Expected Ranges

  • NZD/USD: 0.6700 - 0.6900 ▲
  • NZD/EUR: 0.6100 - 0.6300 ▲
  • GBP/NZD: 1.9150 - 1.9350 ▲
  • NZD/AUD: 1.0550 - 1.0750 ▲
  • NZD/CAD: 0.8550 - 0.8750 ▲