NZD/USD – Kiwi Steady, NZ Inflation Expectations Next

NZD/USD has posted slight gains on Monday, reversing the losses which marked the Friday session. Early in the North American session, the pair is trading just below the 0.68 line. On the release front, the US Empire State Manufacturing Index declined 9.0 points, much weaker than expected. Later in the day, New Zealand will release Inflation Expectations. Wednesday could see some strong movement from NZD/USD, as it’s a data-heavy day. The US will release CPI and Building Permits, while New Zealand publishes the GDT Price Index and PPI Input.

The US manufacturing industry continues to struggle, as underscored by an important manufacturing indicator on Monday. The Empire State Manufacturing Index posted a sharp decline of 9.0 points, well off the estimate of a gain of 7.2 points. The indicator had surprised with  a gain of 9.6 points in April, and the markets were counting on another strong gain. Manufacturing continues to be a soft spot in a generally solid economy, as a weak global economy and the slowdown in China have reduced demand for US-made goods.

US releases wrapped up the week on a positive note, highlighted by solid retail sales and consumer confidence reports. Core Retail Sales posted a strong gain of 0.8%, above the estimate of 0.6%. Retail Sales surged 1.3%, its strongest gain in over six years. The gain was all the more impressive as the markets had anticipated a decline of 0.3%. Consumer confidence also looked sharp, as UoM Consumer Sentiment jumped to 95.8 points, compared to the estimate of 89.9 points. This was the indicator’s best showing since April 2015. On the inflation front, PPI posted a small gain of 0.2%, shy of the forecast of 0.3%. We’ll get a look at CPI reports on Tuesday. A rate hike remains on the table for June, but the Fed is unlikely to make a move if inflation numbers fail to improve. On Wednesday, the Fed will release the minutes of its April policy meeting. The markets will be combing through the report, looking for hints about what the Fed has planned for this summer.

The RBNZ released its Financial Stability Report last week, as the RBNZ noted its concerns about the New Zealand economy. The report stated that weak global growth, low dairy prices and high house prices posed risks to the New Zealand economy. The soft global economy continues to take a toll on the New Zealand export sector, and RBNZ Governor Graeme Wheeler did not mince words, saying that the outlook for the global economy has “deteriorated” in the past few months. Inflation is currently at 0.4%, well short of the Bank’s target of 2.0%. The RBNZ has been reluctant to respond to low inflation with another rate cut, due to concerns about the housing market. Housing prices continue to rise in Auckland, home to one-third of the country’s population, and lower rates could overheat the housing market and have negative repercussions on the economy.  The RBNZ surprised the markets with a quarter-point cut in March, lowering rates from 2.50% to 2.25%. The Bank stayed on the sidelines in April, and will have a tough decision to make when it sets the Official Cash Rate on June 8. Low inflation numbers could prod the RBNZ to cut rates again next month.

NZD/USD Fundamentals

Monday (May 16)

  • 8:30 US Empire State Manufacturing Index. Estimate 7.2. Actual -9.0
  • 10:00 US NAHB Housing Market Index. Estimate 59. Actual 58
  • 16:00 US TIC Long-Term Purchases. Estimate 36.5B
  • 23:30 New Zealand Inflation Expectations

Upcoming Key Events

Tuesday (May 17)

  • 8:30 US Building Permits. Estimate 1.13M
  • 8:30 US CPI. Estimate 0.4%
  • 8:30 US Core CPI. Estimate 0.2%
  • Tentative – New Zealand GDT Price Index
  • 18:45 New Zealand PPI Input. Estimate 0.3%

*Key releases are highlighted in bold

*All release times are EDT

NZD/USD for Monday, May 16, 2016

NZD/USD May 16 at 10:00 EDT

Open: 0.6763 Low: 0.6745 High: 0.6805 Close: 0.6803

NZD/USD Technical

S3 S2 S1 R1 R2 R3
0.6542 0.6621 0.6738 0.6897 0.7011 0.7100
  • NZD/USD has posted slight gains in the Asian and European sessions
  • There is resistance at 0.6897
  • 0.6738 is providing support

Further levels in both directions:

  • Below: 0.6738, 0.6621 and 0.6542
  • Above: 0.6897, 0.7011, 0.7100 and 0.7231
  • Current Range: 0.6738 to 0.6897

OANDA’s Open Positions Ratio

The NZD/USD ratio is showing little movement on Monday. Long positions have a slight majority (54%), indicative of slight trader bias towards NZD/USD continuing to move to higher levels.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.