The New Zealand dollar is in positive territory in the Tuesday session. NZD/USD is currently trading at 0.7186, up 0.32%. The kiwi has surged 4.17% in October as the US dollar has been struggling.
NZ Business Confidence looms
New Zealand has experienced relatively few Covid cases, but this has come at a steep price, as Auckland, the country’s largest city, has been under a strict lockdown for over two months. This has dampened economic activity and hurt business confidence. Since February, the ANZ Business Confidence index has been in positive territory only once. The October reading will be released on Wednesday and the negative trend is likely to continue.
The RBNZ raised interest rates earlier this month, in what is expected to be a series of rate hikes stretching into 2022. The central bank raised rates from 0.25% to 0.50% and would prefer to continue in increments of 25 basis points. However, with inflation running at high levels and no indications of a drop anytime soon, the bank may have to reconsider its stance and next raise by 50 basis points in order to curb inflation before it poses a threat to the recovery. The RBNZ holds its next policy meeting on November 24th, and the markets have priced in another hike, with a key question being the size of the hike.
In the US, the Fed has done its utmost to communicate clearly with the markets ahead of a taper. On Friday, Powell stated, “I do think it’s time to taper; I don’t think it’s time to raise rates”. Powell receives full marks for the Fed’s transparency with the markets, and so far there are no indications of a taper tantrum on the parts of the markets, with the Fed widely expected to taper at next week’s policy meeting.
- NZD/USD is testing resistance at 0.7170. Above, there is resistance at 0.7230 and 0.7309
- There are support lines at 0.7061 and 0.6971
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