Thu, Jun 08, 2023 @ 09:49 GMT
HomeContributorsFundamental AnalysisNew Zealand Dollar Runs Out of Steam, Business Confidence Next

New Zealand Dollar Runs Out of Steam, Business Confidence Next

The New Zealand dollar is lower on Wednesday. NZD/USD is trading at 0.6236 in the North American session, down 0.28%. In the US, Pending Home Sales slowed but were better than expected. Later in the day, New Zealand releases ANZ Business Confidence.

New Zealand business confidence expected to improve

New Zealand’s business sector has been pessimistic about the economy and that is expected to continue. The ANZ Business Confidence Index has been mired in negative territory, and no relief is expected from the March release on Thursday (New Zealand time). The estimate stands at -47.5, versus -43.3 prior. The silver lining is that things have improved since a multi-year low reading of -70.2 in December.

The New Zealand economy slowed in Q4, with a gain of 2.2% y/y, down sharply from 6.4% in Q3 and below the estimate of 3.3%. The continuing rise in interest rates has dampened economic activity, with RBNZ Chief Economist Conway describing the slowdown as “welcome”. Conway acknowledged that even with the central bank’s aggressive tightening cycle, it was uncertain if inflation expectations had been contained.

The RBNZ has projected inflation expectations for Q1 at around 5.5%, and inflation is running at a 7.2% clip, despite the central bank’s tightening. The RBNZ meets next on April 5th  and the markets have priced in a 25-bp hike at 90%. That could be the end of the current tightening cycle, with a 50/50 chance of another rate hike in May and rising speculation of a rate cut before the end of the year.

US Pending Home Sales outperform

In the US, Pending Home Sales beat expectations, as the February reading came in at 0.8%, versus 8.9% prior and an estimate of -2.9%. The Case-Shiller Housing Index declined for a ninth straight month, falling to 2.5% in January, shy of the forecast of 2.6% and the prior reading of 4.6%. The housing sector is in a slump, with mortgage payments almost doubling from a year ago.

NZD/USD Technical

  • NZD/USD put pressure on resistance at 0.6276 earlier in the day. Above, there is resistance at 0.6349
  • There is support at 0.6221 and 0.6148

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