- NZDS/USD holding by the skin of its teeth as the greenback start to recover.
- The week ahead could provide some headwinds for the bird with the RBNZ slated.
NZD/USD is starting out the week below structure although in a correction of` Friday's New York sell-off to the 0.6580 lows.
The greenback's recovery extended on Friday's Nonfarm Payrolls jobs data which beat expectations.
The key takeaways in Nonfarm Payrolls that another 1.8 million in July came with the Unemployment Rate falling to 10.2% while the hours worked were still down 9% vs. pre-pandemic; with concerns linger over the long-run outlook.
This came US/China tensions flared up, lending further support to the US dollar.
As analysts at ANZ Bank note, the US President Donald Trump announced on Friday that US residents would be banned from doing business with ByteDance’s TikTok and Tencent’s WeChat in 45 days’ time, hitting tech stocks.
The move would affect Apple’s phone sales in China as it would not be able to distribute the ubiquitous, even essential, WeChat app on its phones. To be fair, 45 days is a long time, and the market will hope the ruling is softened. But with an election looming, talking tough on China appears to be the strategy, and markets should probably expect more volatility from this source.
The week ahead
It could be a week of obstacles for the kiwi as investors get set for the Reserve Bank of New Zealand as it delivers a lift in the size of the LSAP QE programme on Wednesday.
There is some uncertainty about where the RBNZ will land on QE, but the greatest room for surprise is likely to be what the RBNZ says on other unconventional monetary policy tools, analysts at ANZ bank explained.
We expect that the RBNZ will keep its options open, with a negative OCR and foreign asset purchases on the table, reaffirming market expectations that a negative OCR next year is a non-trivial possibility (with 25bps priced in by mid-2021), and keeping a lid on the elevated exchange rate.
Most local data has beat expectations of late; while welcome, the longer-term outlook remains highly uncertain and we expect all options – including negative rates and foreign asset purchases to remain on the table.
This all speaks to headwinds for the NZD.
First up, we have data today in the preliminary read of the ANZ Business Outlook survey for August and China’s PPI and CPI data for July.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.