NZD/USD rallies in thin market conditions, Kiwi strongest on the board

NZD/USD has been a top performer on the day in holiday thin markets, rallying over 0.5% between a low of 0.6637 and 0.6676 so far. The commodity complex is performing well which is underpinning the bird.

The kiwi has been climbing since October and most recently underpinned following a stabilisation in leading indicators such as business sentiment, PMI surveys, and consumer confidence.

This has given a degree of comfort that a further deceleration is now looking less likely. We also had a slightly stronger print than expected in Gross Domestic Demand where the September quarter growth and annual revisions to GDP provided the most important insights on the economy's recent performance.

"Growth continues to fall short of the roughly 2.6% y/y rate that the RBNZ needs to see exceeded for inflationary pressure to build," analysts at ANZ Bank argued:

And looking forward, it remains a story of growth just not quite delivering what the RBNZ needs to be confident of hitting its inflation target, with inflation pressures set to wane in this environment and inflation expectations at risk of falling further. Given that, we think that a lower OCR is likely in time. We have pencilled in a 25bp cut in for May, taking the OCR to 0.75%." 

US/Sino trade deal in the making

The Chinese Foreign Ministry spokesman, Geng Shuang, was vocally optimistic on Wednesday and said that officials from Beijing and Washington were in “close communication about detailed arrangements for the deal’s signing and other follow-up work.”

On Xmas Eve, President Trump said that the “deal is done, it’s just being translated right now,” adding that China’s leader, Xi Jinping, would hold a signing ceremony for the partial trade resolution in January.

“We’ll be having a quicker signing because we want to get it done.”

NZD/USD levels