Early Thursday in Asia (21:45 GMT on Wednesday elsewhere), the market sees the second-quarter (Q2) 2021 Gross Domestic Product (GDP) data from New Zealand.
Today’s NZ GDP print becomes more important as the Q2 figures for Unemployment and inflation have already signaled an RBNZ rate hike this year even as the local lockdowns have challenged the policy hawks.
Also increasing the importance of today’s GDP data is the latest updates from the New Zealand Institute of Economic Research (NZIER) as the think tank hints at slower growth figures for the short-term.
The forecast suggests, GDP rise is 1.3% versus the previous 1.6% on a QoQ basis, which in turn will lead to a whopping 16.3% YoY number against the 2.4% previous readout, mainly due to the weak 2020 base.
Ahead of the release, the Australia and New Zealand Banking Group (ANZ) said,
We’ve penciled in a 1.2% q/q lift in production GDP, which would see annual growth come in at 16.2% – but that’s mostly due to the very weak base from lockdown in 2020. We’re expecting that growth was also pretty broad-based across primary, goods, and services industries. Dated as the data are, this dataset has a reputation for upsetting the apple cart, so to speak. Because this data informs us on the economy’s historical starting point, it’s the one dataset that, if strong, will feed the “RBNZ has some catching up to do” vibe that has in turn seen markets price in ~15% odds of a +50bp OCR hike in October. That said, given how lofty expectations for hikes now are, soft data could see those, and NZD strength unwound.
Westpac follows the footsteps while saying:
Westpac is expecting GDP to rise 1.7% in Q2. This forecast is towards the top end of the market range and a multiple of the RBNZ’s expectations.
How could the GDP affect NZD/USD?
NZD/USD holds onto recovery moves from a two-week low, marked the previous day while edging higher around 0.7110 at the start of Thursday’s Asian session. The kiwi pair recently benefited from the broad US dollar pullback, as well as the upbeat risk appetite that propelled equities and commodities. Market optimism could be linked to a lighter calendar and challenges for the Fed’s tapering after the US Consumer Price Index (CPI) softened, joining the line of the downbeat monthly employment figures and challenging the Fed hawks. Also keeping the kiwi pair buyers positive is the outlook for today’s GDP as well as hopes of overcoming the pandemic in a week, as the virus-led alert level is up for easing soon.
That said, today’s New Zealand GDP will be important as the latest inflation and job numbers have backed the RBNZ hawks. Hence, a positive surprise will inflate the odds of the RBNZ rate hike in 2021 and propel the NZD/USD prices. On the contrary, softer figures may join the covid fears and cautious mood ahead of the next week’s FOMC to push the kiwi pair towards the second negative weekly closing.
Technically, NZD/USD is well capped between 100-DMA and 200-DMA for last one week, respectively around 0.7075 and 0.7120. Hence, any clear breakout of the said region will be decisive for the pair traders to watch.
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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