This week, the New Zealand dollar (NZD) has gained strength compared to a weakened US dollar. The Kiwi is trading at approximately 0.6020 due to a rare lull in global stocks, unexpected partial government shutdowns in the US, and unanticipated changes in consumer confidence.
Here’s a breakdown of some of the key factors that may be contributing to NZD/USD momentum, along with what you should pay attention to in the coming days.
Weakening of the US Dollar
The recent increase in NZD is not due to a rise in New Zealand’s economy, but rather due to the weakening of the US Dollar. Traders within the US are presently operating within a data vacuum.
Since the delay in crucial economic reports like January Nonfarm Payrolls(NFP) and the recent partial government shutdown has created an uncertain environment for investors. This is the reasons they are hesitant in placing big bets on the Greenback.
It is expected that unemployment will be held steady at 4.4%, with a slight gain of 70,000 jobs. Without the confirmation of these numbers, the US dollar is expected to remain on the back foot.
Unexpected Optimism in the US
Regardless of a weakening dollar, the US consumers are not feeling bad about it. The Michigan Consumer Sentiment Index recorded a six-month high of 57.3, defeating all experts’ expectations.
Despite the fact that people appear to be feeling positive about their wallets, the US dollar continues on its path of depreciation due to expected future rate decreases later this summer.
Mixed Signals from New Zealand
In New Zealand, the economic picture is more intricate, as the recent data shows a mixed picture. Employment rate has shown a positive growth, which indicates that businesses are still hiring. However, despite hiring, the unemployment rate has recorded a decade-high value.
This prevailing condition has persuaded experts that the Reserve Bank of New Zealand would not increase interest rates in the near future. Especially, under the leadership of the new Governor, Ann Breman, the Central Bank is expecting that the interest rates will remain the same in the upcoming meeting on Friday.
What’s Next
This week will be primarily dominated by three big events
The US delayed Jobs reports will finally be released on Wednesday, and a strong report could again strengthen the dollar
The expected release of the US inflation data(CPI) on Friday will give a clear picture of whether the climbing prices are truly cooling down
The RBNZ’s policy meeting in New Zealand will determine the place for the Kiwi in the rest of the quarter.
Final Thoughts
Currently, NZD/USD is basking in the limelight. With U.S. dollars experiencing downward pressure from delayed economic data and the Kiwi maintaining its 0.6000 support level, it looks like there is little stopping upward momentum. However, as top-notch economic data is coming up soon, enough volatile price movement will likely happen.
