The New Zealand dollar has kicked off the new trading week with slight gains. Currently, NZD/USD is trading at 0.7182, up 0.33% on the day.
NZ consumer confidence remains high
The New Zealand consumer remains optimistic about the economy, according to the well-respected Westpac Consumer Sentiment Index. In the fourth quarter of 2020, the index came in at a robust 105.2, down slightly from Q1. The country has done an admirable job containing the Covid pandemic, but recent economic data has been soft. Last week’s GDP report, which showed a decline of 1.0% in Q4, surprised the market, which has forecast a small gain 0f 0.2%. The weak reading sent NZD reeling, with a decline of 1.09%. On an annualized basis, GDP declined by 0.9% in Q4. This decline could signal that pent-up demand is falling, and raises a strong possibility of a double-dip recession. With tourists barred from entering New Zealand in the normally brisk summer, there is a strong likelihood that the economy will record another quarter of negative growth.
Investors eye Fedspeak
The FOMC policy meeting was one of the highlights of last week, and the market will be again paying close attention to the Federal Reserve this week. Later on Monday, Fed Chair Powell will participate in a panel and we’ll also hear from FOMC members today and on Tuesday. Powell will testify on Tuesday and Wednesday before Congress, together with Treasury Secretary Yellen. The topic of the testimony is Covid relief, but investors will be listening for any comments from Powell or Yellen related to higher bond yields or inflation. Any remarks in this vein could affect the direction of the US dollar. There are no economic releases out of the US on Monday, so investors will be able to focus on statements coming out of the Federal Reserve.
After posting sharp losses late last week, NZD is range-trading:
- There is resistance at 0.7242, followed by resistance at 0.7319
- The first level of support is 0.7115, which is protecting the round number of 0.7100. Below, we have support at 0.7065