New Zealand dollar rally fizzles

Kenny Fisher MarketPulse

The New Zealand dollar has reversed directions after a solid 3-day rally. In the European session, NZD/USD is trading at 0.6432, down 0.55% on the day.

China jitters weigh on NZ dollar

New Zealand’s number one trading partner is China, and it’s no exaggeration to say that when China sneezes, New Zealand catches a cold. China has tenaciously implemented a zero-tolerance policy for Covid, which has meant lockdowns that have confined millions of residents.

Unsurprisingly, this has dampened growth in the world’s number two economy. The Covid restrictions were in full force in April, and UBS has projected that China’s economy plunged by 8.0% in Q2 and has downgraded China’s 2022 GDP to 3.0%, down sharply from 4.2%. Investors should not assume that China’s economy will re-energize once the Covid restrictions are eased – UBS is warning that China does not have a clear exit strategy from its current stringent Covid policy, which will hamper a recovery. The downgrade in China’s GDP (JP Morgan also lowered its forecast from 4.3% to 3.7%) has soured sentiment towards the New Zealand dollar.

Over in New Zealand, retail sales for Q1 came to a screeching halt. The headline figure declined by 0.5%, down from 8.3% in Q4 2020, while core retail sales came in at zero, down from 6.8%. The weak numbers have contributed to today’s New Zealand dollar’s descent.

The Reserve Bank of New Zealand will be in the spotlight on Wednesday when it holds a policy meeting. The central bank is expected to raise rates by 50-bps for a second straight month. This would bring the cash rate to 2.0%, which is considered a “neutral” stance. It’s noteworthy that the cash rate hasn’t been at the neutral level since 2015, so the RBNZ is moving into rarified air. The RBNZ will likely continue its rate-tightening cycle to 3.0% in order to curb spiralling inflation, and at tomorrow’s meeting, the Bank will likely state that more hikes are on the way.

NZD/USD technical

NZD/USD has support at 0.6352 and 0.6287.
There is resistance at 0.6475 and 0.6540.

Author

Kenny Fisher

MarketPulse

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.

EUR/USD flirts with daily highs, retargets 1.1900

EUR/USD regains upside traction, returning to the 1.1880 zone and refocusing its attention to the key 1.1900 barrier. The pair’s slight gains comes against the backdrop of a humble decline in the US Dollar as investors continue to assess the latest US CPI readings and the potential Fed’s rate path.

GBP/USD remains well bid around 1.3650

GBP/USD maintains its upside momentum in place, hovering around daily highs near 1.3650 and setting aside part of the recent three-day drop. Cable’s improved sentiment comes on the back of the Greenback’s irresolute price action, while recent hawkish comments from the BoE’s Pill also collaborate with the uptick.

Gold clings to gains just above $5,000/oz

Gold is reclaiming part of the ground lost on Wednesday’s marked decline, as bargain-hunters keep piling up and lifting prices past the key $5,000 per troy ounce. The precious metal’s move higher is also underpinned by the slight pullback in the US Dollar and declining US Treasury yields across the curve.

Crypto Today: Bitcoin, Ethereum, XRP in choppy price action, weighed down by falling institutional interest

Bitcoin's upside remains largely constrained amid weak technicals and declining institutional interest. Ethereum trades sideways above $1,900 support with the upside capped below $2,000 amid ETF outflows.

Week ahead – Data blitz, Fed Minutes and RBNZ decision in the spotlight

US GDP and PCE inflation are main highlights, plus the Fed minutes. UK and Japan have busy calendars too with focus on CPI. Flash PMIs for February will also be doing the rounds. RBNZ meets, is unlikely to follow RBA’s hawkish path.

Ripple Price Forecast: XRP potential bottom could be in sight

Ripple edges up above the intraday low of $1.35 at the time of writing on Friday amid mixed price actions across the crypto market. The remittance token failed to hold support at $1.40 the previous day, reflecting risk-off sentiment amid a decline in retail and institutional sentiment.