Kiwi bears were out in force this week, likely continuing to price in last week’s dovish shift from the Reserve Bank of New Zealand.
New Zealand Headlines and Economic data
- New Zealand business confidence: gloom and more gloom
- RBNZ rate cut expected in May as business confidence falls
- The ANZ World Commodity Price Index pushed up 1.4% m/m in March, continuing the positive trend present since the beginning of the year
Major Market Drivers for the New Zealand Dollar
Despite the general upswing in global risk sentiment (surprise positive Chinese leading economic data and U.S.-China closer to a trade deal) and the Aussie in rally mode this week, it was a tough one for Kiwi bulls. Kiwi bears were definitely taking charge this week, likely on fresh sentiment of a possible rate cut coming from the RBNZ, sparked by their dovish meeting last week.
This speculation was likely reinforced after the latest NZIER business confidence survey data was released, showing that 27% of firms who participated in the quarterly survey expected a continued decline in economic conditions, which was worse than the previous quarter’s survey of 18% of participants expecting worse conditions.
Kiwi pairs sold off uniformly on the news until Wednesday’s trading session, where they momentarily bottomed out with the help of bullish economic updates news for its close trading partner, Australia. Australia saw retail sales soar and their trade surplus surge in March, as well as the Australian government releasing a stimulative annual budget plan that included tax cuts and infrastructure investments. These events sparked a rally in the Aussie, which sometimes pulls the Kiwi up with it as they are close trading partners.
Unfortunately for Kiwi bulls, the rally was short lived as it topped out during the Wednesday U.S. trading session. Without a fresh bearish catalyst from New Zealand and risk sentiment still on the upswing, NZD pairs broadly moved lower into the weekend, again likely on continue pressure from speculation that the RBNZ may cut rates once or twice this year. Whatever the case may be for the weakness, at the end of the week the New Zealand dollar clocked in as the biggest loser of against all the major currencies!