Early Thursday in Asia (22:45 GMT on Wednesday), the market sees second quarter (Q2) Gross Domestic Product (GDP) data from New Zealand. With recent weakness in Retail Sales, Construction and Manufacturing numbers, investors will be keen on observing as to how the growth number can affect the Reserve Bank of New Zealand (RBNZ) decision later in the month.
Forecast suggests, GDP to weaken to 0.4% versus 0.6% prior on QoQ basis, which in turn will lead to 2.0% YoY number against 2.5% previous making it the slowest growth figure since fourth quarter (Q4) of 2013.
TD Securities follows the suit while saying:
“Our Q2 GDP forecast is in line with the RBNZ’s 0.5%/q forecast, placing annual growth at 2%, the slowest since Q4 2013. This outcome should see the RBNZ keep the cash rate on hold later in the month. Soft real retail sales, lower construction and manufacturing are likely to slow growth over the qtr. Service industries had recorded their lowest qtrly growth in Q1 since Q3 2012, but we anticipate a bounce, supporting our GDP forecast.”
Australia and New Zealand Banking Group (ANZ) is also on the same track ahead of the release as it says:
"We’re expecting a 0.4% q/q print, which would take annual growth down to 2.0% y/y – the lowest since Q4 2013. Across the ditch, Australian employment data is due at 1:30pm NZT."
How could the GDP affect NZD/USD?
While market’s present reaction is more tilted towards a bit hawkish Fed rate cut, a GDP figure similar to the RBNZ’s forecast might not lend much of the momentum in the NZD/USD pair as the New Zealand’s central bank is prepared for the same. However, an upbeat reading could place higher importance on the recent trade-positive headlines from the US and Chinese front and could trigger the pullback of the Kiwi pair.
Technically, monthly bottom surrounding 0.6270 holds the key to pair’s further declines towards a downward-sloping trend-line connecting May 2017 lows and October 2018 bottom, around 0.6170 whereas 21-day simple moving average (SMA) level of 0.6365 acts as an immediate upside barrier, a break of which can trigger fresh advances targeting 0.6400 mark.
About New Zealand Gross Domestic Product (GDP)
The Gross Domestic Product released by the Statistics New Zealand is a measure of the total value of all goods and services produced by New Zealand. The GDP is considered as a broad measure of New Zealand economic activity and health. Generally speaking, a high reading is seen as positive (or bullish) for the NZD, while a falling trend is seen as negative (or bearish) for the NZD.
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