NZ dollar climbs on sharp mfg. data

The New Zealand dollar has posted strong gains on Wednesday. NZD/USD is trading at 0.6841 in the European session, up 0.55% on the day.

Manufacturing Sales surge in Q4

Manufacturing Sales were outstanding in the fourth quarter, with a gain of 12.0%. This marked an impressive rebound from the -2.3% reading in Q3. Construction sales also soared by 16%. The strong numbers were a result of the easing of Covid lockdowns in the fourth quarter, as pent-up demand led to an upsurge in economic activity. We’ll get a look at another barometer of the manufacturing sector on Thursday, with the release of BusinessNZ Manufacturing Index. A strong reading would be another indication that the manufacturing sector is gaining strength.

 

The New Zealand dollar continues to show volatility, and as a risk currency it is vulnerable to haven flows to the US dollar. The war in Ukraine has raised risk aversion, as the West continues to slap sanctions on Moscow. On Tuesday, US President Biden announced a total ban on Russian energy imports, but EU members are unlikely to join, as Europe is much more dependent on Russian energy supplies than the US. At the same time, the kiwi is also a commodity-based currency and the surge in commodity prices has provided some support, as NZD/USD is up 1.0% in the month of March.

 

The Federal Reserve will almost certainly raise rates next week, likely by 25 basis points. With the turbulent economic landscape due to the Ukraine crisis and the staggering rise in oil prices, Fed policy makers have to also worry about stagflation. The Fed will have to be cautious about raising rates and not choking off economic activity, which means that we could see a slower timeline for raising rates than what the markets had anticipated only a few weeks ago.

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NZD/USD Technical

  • NZD/USD has support at 0.6802 and 0.6733
  • There is resistance at 0.6931 and 0.7000

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

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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