New Zealand trades lower driven by shifting investor sentiment
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Daily Currency Update
The New Zealand dollar is weaker this morning against the Greenback trading at 0.5938 at time of writing. The NZD/USD weakened by around 1%, breaking below the 0.6000 psychological level by week’s end. The drop through the 0.6000 level triggered technical selling. Technical indicators signal further room to the downside toward the 0.594–0.595 zone. On the domestic front last week New Zealand's economy grew faster-than-expected in the first quarter, firming up the recovery from last year's recession and giving the central bank more time to consider when it needs to cut interest rates again. Gross domestic product (GDP) rose 0.8% in the March quarter from the previous three months, Statistics New Zealand data showed on Thursday. That was faster than analysts' forecasts for a 0.7% increase and the Reserve Bank of New Zealand's forecast for 0.4% growth. It followed a 0.5% increase in the fourth quarter, which was downwardly revised from 0.7%. The Reserve Bank of New Zealand is maintaining gradual monetary easing, having already cut rates by 225 bps to 3.25%. The Q1 GDP surprise gives them room to slow the pace, potentially pausing in July, but they remain cautious due to global economic headwinds and trade risk. Future moves will depend closely on incoming data and geopolitical developments.Key Movers
The US dollar Index (DXY) is trading sideways on Friday, holding above 98.00, as markets digest this week’s key geopolitical and monetary policy developments. While rising tensions in the Middle East have kept risk appetite in check, gains for the Greenback remain limited amid growing expectations for Federal Reserve (Fed) rate cuts this year. The Federal Reserve last Wednesday said that it will leave its benchmark interest rate unchanged following its June monetary policy meeting as policymakers continue to monitor inflation and labor market data amid elevated economic uncertainty. The central bank's decision leaves the benchmark federal funds rate at a range of 4.25% to 4.5%. It comes after the Fed left rates at that level at its three prior meetings in January, March and May. The central bank cut rates at its final three meetings last year, which involved a 50-basis-point cut in September and a pair of 25-basis-point reductions in November and December. Looking ahead this week and the Fed Chair Jerome Powell will begin his two-day testimony before congressional and Senate financial committees on Tuesday. There will be significant pressure on the Fed head to explain why the Fed is so concerned about policy uncertainty, but not worried enough to deliver rate cuts that could alleviate some of the US’s debt servicing costs.Expected Ranges
- NZD/USD: 0.5800 - 0.6000 ▼
- NZD/EUR: 0.5100 - 0.5300 ▼
- GBP/NZD: 2.2450 - 2.2650 ▲
- NZD/AUD: 1.0700 - 1.0900 ▼
- NZD/CAD: 0.8050 - 0.8250 ▲