The New Zealand dollar has posted gains on Thursday, erasing most of the losses sustained on Wednesday. Currently, NZD/USD is trading at 0.7047, up 0.44% on the day.
It has been a light calendar week for New Zealand events, and the New Zealand dollar is almost unchanged this week. With the global economy slowly finding its footing, the demand for New Zealand exports has been growing. This was reflected in the ANZ Commodity Price Index, which rose 6.1% in March, its strongest gain since October 2015. The news was less positive from ANZ Business Confidence as the April read fell to -8.4 points, down from zero beforehand. Cost pressures are building, as the economy is showing some strain.
Fed minutes indicate no change in monetary stance
The FOMC minutes was a non-event for the currency markets, as the Fed signalled to the market that it would maintain its dovish monetary stance. FOMC members felt that the risks to the economy remain balanced, but at the same time, economic activity remains well below the FOMC’s longer-term goals. The minutes stated that the labor market has not recovered to pre-Covid levels, but on a positive note, stated that the recent rise in Treasury yields pointed to improving economic conditions.
Policymakers at the Federal Reserve remain firmly of the view that the US economy still requires support until the recovery has deepened. With significant slack in the economy, inflation remains at low levels. Pent-up demand in the US economy is expected to unleash higher inflation, but the Fed appears unconcerned about the spectre of runaway inflation, with the minutes stating that “underlying inflationary pressures remained subdued”.
There had been some speculation leading up to the meeting that the Fed might hint at a tapering of QE, given the sharp improvement in employment numbers, but the takeaway message to the market was that any reduction in QE is off the table until further notice.
- On the upside, there is pressure on 0.7072. This is followed by resistance at 0.7112
- There is support at 0.6969, followed by support at 0.6906, which is protecting the round number of 0.6900
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