The Kiwi broke its winning streak last week. Will this week’s catalysts bring it back to the winners’ table?
New Zealand won’t be printing any top-tier economic reports this week, but that doesn’t mean we won’t see any action for the Kiwi.
The U.S. NFP report scheduled on Friday, for example, could make waves big enough to affect the New Zealand dollar’s price action.
And then there’s the markets’ sentiment over global trade conditions. Until the U.S. moves on from its NAFTA negotiations and into talks with China, export-dependent economies like New Zealand’s will have to deal with uncertainty.
Last Week’s Price Review
After two weeks of being part of the winners’ club, the Kiwi’s membership may soon be revoked since the Kiwi is currently on track to closing out the week in second-to-last place (as of 7:00 am GMT).
The Kiwi opened the week with a repeat performance of last week’s opening moves by creeping below last week’s closing prices (dashed horizontal line), which is kinda weird since risk-taking was the dominant sentiment on Monday and the Greenback was softer to boot.
There was no apparent reason for the bearish pressure on most NZD pairs, but profit-taking is a possibility since the Kiwi was the third strongest currency last week.
At any rate, the Kiwi’s price action made more sense on Tuesday since risk-taking persisted and most NZD pairs began to turn higher. The Greenback regained its mojo during Tuesday’s U.S. session, however, so the Kiwi’s broad-based recovery was cut short.
The Kiwi then turned in a mixed performance on Wednesday before slumping pretty hard on Thursday, thanks to ANZ’s August Business Confidence Report since that revealed that 50.3% of businesses expect business conditions in New Zealand to deteriorate in the year ahead.
The details of the report were also rather dreary, since a net 5% of businesses are expecting to reduce investments. Employment intentions are also down by 6%, with all sectors planning to downsize their workforce. Inflation expectations also fell and only 34.2% of businesses are expecting a rate hike in the year ahead, down from 41.8% back in July.
Anyhow, the Kiwi did get some respite after the strong selling pressure, probably because of short-covering.
However, the Kiwi wasn’t able to attract enough buyers to stage a strong recovery, very likely because risk aversion made a comeback on Thursday and continued to dominate during Friday’s Asian session.