The New Zealand dollar ended the week with gains and continues to move higher on Monday. Currently, NZD/USD is trading at 0.7216, up 0.28% on the day.
New Zealand Inflation Expectations next
The New Zealand economy has rebounded impressively since the dark days of Covid in 2020, when the country experienced a recession. The economy is currently firing on all cylinders, and this has led to Inflation Expectations slowly moving higher, with a read of 1.53% in Q4 of 2020. This indicator is closely watched because inflation expectations can translate into actual inflation. If the indicator continues to accelerate, the New Zealand dollar could respond with gains.
New Zealand posted excellent employment numbers last week, in particular the unemployment rate which dropped sharply and defied the forecasts. Interestingly, the New Zealand dollar did not respond to the strong job data with gains. Still, there has been a significant shift in market perception of future interest rate policy. It wasn’t all that long ago when there was speculation that New Zealand might follow the lead of the ECB and Swiss National Bank and introduce negative interest rates. However, with the economy rebounding so quickly, analysts are now projecting a rate hike in 2023.
Are the markets correct in their perception that the RBNZ is changing its monetary policy stance? We’ll hear from the RBNZ itself at the next policy meeting on February 24, an event that is sure to be closely watched. If the central bank hints at a rate hike, the New Zealand dollar could get a significant boost. At the same time, NZD/USD has surged in recent months, and the central bank does not want this upward trend to continue.
- 0.7240 is under pressure in resistance. Close by, there is resistance at 0.7277
- There is support at 0.7150. Below, we find support at 0.7097
- The 50-day moving average (MA) remains relevant, at 0.7141