Global Themes

NZD

Kiwi in central bank waiting room

Languid overnight markets eye Fed, RBNZ meetings tomorrow.

The New Zealand Dollar has checked into the doctor’s waiting room and awaits it’s near term diagnosis as a massive 24 hours looms for the currency. At 6am the Federal Reserve Bank in the US are expected to shift their rates upward to 2.25%, but their forward guidance via the “dot plot”, mapping where each Fed member sees interest rates going over the next year, will perhaps be the closest watched piece of data released. Hot on its heels the RBNZ make their latest announcement, with no change expected on rates, but analysts will be keen to see if they are at all swayed by the recent 1% GDP print for Q2, or they look through this as a temporary surge in an otherwise slowing late cycle economy.

NZD/USD settles in the mid 0.66s today, stabilising after yesterday’s fall, but remains exposed to the double combo of a hawkish Fed and dovish RBNZ tomorrow.

Does confidence matter?

US consumer confidence hits 18 year high.

Comparing local business and consumer confidence with that in the US is dare I say it, like comparing the All Blacks and Wallabies over the last 15 years. Last night a fresh survey of US consumer confidence hit 18 year highs. Trump may not be finding many friends overseas but 4.2% growth and 3.9% unemployment seem to have Heartland America feeling good about themselves, which augurs well before the key Autumn retail season in the States.

Locally business confidence showed a net 50.3% of respondents were negative about the year ahead in last month’s ANZ survey. We’d like to think the recent GDP surge might see an uptick in this afternoon’s release but don’t bank on it. We are sure that some surveyed use this as a source of political protest, but in the end confidence does impact our behaviour and taking a cue there may be leaner times ahead for both NZ and the NZD heading into year end.

Trade balance released today

Strong deficit forecast for August.

Last month’s annual trade balance deficit hit a 9 year high of $4.44B, and while forecasts suggest the gap could be as high as $930M in August alone we wouldn’t be surprised to see imports pare back as buyers took stock of a lower currency and circulated inventory, and therefore see a deficit much lower than this.

This afternoon, business confidence remains a risk for the Kiwi but market reaction may be relatively benign as traders position for a volatile few hours tomorrow morning following both the Fed and RBNZ meetings.

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