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The New Zealand dollar took cues from its counterparts last week. Will it have a chance to dance to its own tunes this time?

Hmm, maybe not. At least not when we look at the potential catalysts:

Greenback demand

As you can see below, the Kiwi found itself near the bottom of the forex pile thanks to rising dollar demand.

This week we’ll hear more details around the Fed’s last monetary policy. Remember that markets expect Powell and his team to raise their interest rates pretty soon, so y’all should see hawkish remarks right about now.

If the Fed continues to wait for more data before sharing their hawkish sentiments, then the Kiwi could gain some ground on the dollar. But if analysts adjust their rate hike expectations forward after the meeting minutes release, then we might see dollar domination (and Kiwi weakness) across the board.

Overall risk sentiment

Though New Zealand won’t be printing top-tier economic reports, catalysts of other major currencies might cause ripples on the Kiwi’s price action.

A potentially eurosceptic government in Italy, for example, could drag on EUR/NZD.

And then there are geopolitical and trade-related news like headlines on Iran’s sanctions, Kim Jong-Un’s meeeting with Trump, and U.S.-China trade deals, which could affect demand for high-yielding currencies like the Kiwi.

Last Week’s Review

The Kiwi is the third-weakest currency of the week (as of 7:00 am GMT). This is a better ranking compared to last week when the Kiwi found itself at the bottom of the forex heap. Even so, this still marks the fifth consecutive week of net losses for the Kiwi.

Overlay of NZD Pairs: 1-Hour Forex Chart
Overlay of NZD Pairs: 1-Hour Forex Chart

The Kiwi showed weakness right from the get-go, likely because of the prevalence of risk aversion on Monday. Signs of risk-taking did eventually return during Monday’s U.S. session. Unfortunately for the Kiwi, the Greenback was beginning to find buyers at the time because of the rise in U.S. bond yields, which likely dampened demand for the Kiwi.

Risk aversion returned on Tuesday and that, along with the Greenback’s continued domination, very likely gave the Kiwi a painful double whammy.

The latest dairy auction resulted in the GDT index rising by 1.9%. However, that only served as a speed bump for Kiwi bears since selling pressure quickly returned.

Fortunately for Kiwi bulls, the Greenback’s rally began to stall after a bunch of Fed officials gave some cautious remarks. And so the Kiwi finally began to find support.

Things got even better for the Kiwi on Wednesday since U.S. bond yields slipped and the Greenback began to feel some selling pressure after reports began to spread that North Korea was supposedly threatening to walk away from denuclearization talks as a response to U.S. National Security Advisor (and notorious warmonger) John Bolton’s “colorful” comment that the U.S. supposedly has the “Libya Model” in mind for North Korea.

Demand for the Greenback remained lackluster during Wednesday’s morning London session, likely because of the dip in U.S. bond yields. And the Kiwi likely benefited from that since the Kiwi was able to claw its way higher despite the risk-off vibes at the time.

It’s also likely that the Kiwi was benefiting from opposing currency moves since the European currencies (EUR, GBP, CHF) were all getting hammered at the time.

After that, the Kiwi’s price action then began to diverge during Wednesday’s U.S. session. No clear reason why, though.

The Kiwi’s price action did become uniform again come Thursday, likely because of the risk-on vibes. The Kiwi also got rushed by buyers when the New Zealand Treasury released the annual budget since it revealed that growth forecasts for the next two years were upgraded.

There was no follow-through buying, however. In fact, the Kiwi began to encounter selling pressure after that, likely because the Treasury downgraded its growth forecasts for this year from +3.3% to just +2.6%.

And like the RBNZ, the Treasury also downgraded its CPI forecasts.

  • 2018 – downgraded to 1.4% (2.0% previous)
  • 2019 – downgraded to 1.5% (1.9% previous)
  • 2020 – downgraded to 1.8% (2.1% previous)
  • 2021 – downgraded to 1.9% (2.2% previous)
  • 2022 – downgraded to 2.0% (2.2% previous)

And to make matters worse, the Greenback resumed its rally during Thursday’s U.S. session, which likely sapped demand for the embattled Kiwi.

Risk-taking prevailed, however, and the Greenback’s rally began to stall come Friday. And so the Kiwi was able to stage a broad-based recovery. The damage was already done, though, so the Kiwi is still a net loser for the week.