The misery continues for the New Zealand dollar, which is down almost 1% on Thursday. NZD/USD has fallen below the 0.65 level and has plunged 6.54% in the month of April.
Business confidence remains in a deep-freeze
ANZ Business Confidence was unchanged in April, with a reading of -42.0. That means close to half of New Zealand businesses are pessimistic about the economic outlook over the next 12 months. The problems identified by businesses are nothing new, with shortages in materials and workers and inflation driving up costs. New Zealand inflation hit 6.9% in Q1, a 30-year high. In addition to the surge in inflation, businesses expect inflation to continue to rise – in April, inflation expectations rose to 5.9%, up from 5.5% in March.
The upside risk in inflation expectations is a paramount concern for the RBNZ, which faces a massive battle in wrestling inflation to lower levels. Today’s weak Business Confidence report will exacerbate those worries and will support aggressive rate tightening from the RBNZ in order to get a handle on spiralling inflation. A back-to-back hike of 0.50% at the May meeting is a strong possibility.
Even with the RBNZ in aggressive mode, the US dollar continues to pummel its New Zealand counterpart. The Federal Reserve is poised to deliver another half-point hike at next week’s meeting and has hinted at more oversize rate hikes in order to curb high inflation. US Treasury yields are moving higher, which is supporting the US dollar rally. Yields rose on Thursday, even though US GDP surprised with a contraction in Q1, the first negative growth recorded since the pandemic recession in 2020.
- NZD/USD has broken below the 0.6504 line. Next, there is support at 0.6381
- There is resistance at 0.6569 and 0.6692
Content 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 Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at firstname.lastname@example.org. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.