The New Zealand dollar continues to rally and is up 0.82% this week. Earlier in the day, NZD/USD punched above the symbolic 70 line and rose to 0.7034, its highest level since November 2021, before retreating lower.
US Services PMI accelerates
The US Services PMI for March pointed to continuing expansion, with a reading of 58.3. This was shy of the consensus of 58.9 but an improvement from the February reading of 56.5. The services sector has now grown for the 22nd month in a row, a further indication that the US economy is firing on all four cylinders. The PMI report found that businesses continue to be negatively impacted by supply chain problems and inflation. Inventories remain low as businesses continue to struggle to replenish stocks. On a positive note, the report noted that labor shortages have actually eased, as a downturn in Covid cases has led to officials relaxing health restrictions.
The New Zealand dollar is a commodity-based currency, which has been a godsend in a time of risk apprehension and turbulent markets. The surge in commodities has more than compensated for the currency’s sensitivity to risk, and NZD/USD gained 2.35% in March, despite the turmoil over the Russia-Ukraine war. The ANZ Commodity Price index will be released on Wednesday, with the index posting a gain of 3.9% in February, an 11-month high.
We’ll also get a look at NZIER Business Confidence for March, which has struggled. The index fell by 28% in February, as businesses remain pessimistic about the economic outlook.
The RBNZ is never far from the headlines, and investors are eyeing a key policy meeting next week. The central bank has embarked on a rate-hike cycle and has raised rates from a record-low 0.25% to 1.00%. Another increase next week would likely propel the New Zealand dollar to higher ground.
NZD/USD Technical
- NZD/USD broke above resistance at 0.6986 earlier, before retreating. Above, there is resistance at 0.7054
- There is support at 0.6863 and 0.6808
