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NZD

US equities reach new highs

Dow sets a new high

The DOW closed at a record high this morning, reaching 26,688.15, 50 points higher than the previous record. In following with the risk-on rhetoric over the past few days, the USD weakened as equities rallied. This, coupled with positive NZ GDP data saw the NZD break from recent lows and rally against all major currencies.

The NZD/USD was a major performer reaching a high of ~0.6692, closing in on that, now elusive, 0.6700 level. NZD/JPY broke through resistance at 75, reaching a high of 75.25 - a welcome change for car importers. Looking to the European region, the NZD/GBP rallied approximately 30 points, opening this morning around ~0.5038.

If the rally in US equities continues the NZD may well follow suit. Being a commodity currency, the NZD is typically stronger in a risk-on environment. A new high in the DOW could potentially pave the way for further gains. Importers should watch closely, and consider using market orders to take advantage of any further moves. It pays to remember that a bounce in markets does not necessarily denote a permanent trend change - there is still very much risk of downside in the medium term as Federal Reserve Interest rate hikes loom.

NZ GDP figures surprise

But did they surprise Jacinda?

In keeping with Prime Minister Jacinda Ardern's oddly certain forecast of GDP being positive, in what some may consider a Trump-esque moment - referencing information that was yet to be released, GDP figures came in at 1.0% for the quarter versus expected of 0.8%. If GDP continues on a positive trajectory, does that mean that the RBNZ may be forced to re-address their current stance of holding rates which is seemingly protecting the mortgage market?

Sure the next key piece of information for the RBNZ to consider will be consumer sentiment and spending ahead of Christmas. With the festive season bearing down on us, consumer confidence could give the NZ economy a further boost, provided the negative views of the Labour government begin to subside.

Looking ahead

Next week

Wednesday:

2:00am US consumer confidence

Thursday:

6:00am US Federal reserve meeting

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