Wonky price action this week for the Kiwi as this high-yielder bucked the risk-off sentiment by taking advantage of counter currency weakness.
New Zealand Headlines and Economic data
- New Zealand Services PMI falls to 53.8 in February vs. 56.2 in January
- New Zealand consumer confidence down 5.3 points to 103.8 in March
- NZ’s current account deficit slightly narrower than expected in December quarter
- NZ GDP picks up but soft prices keep rates outlook benign
- New Zealand credit card spending up 6.4% y/y vs. 6.9% previous
Major Market Drivers for the New Zealand Dollar
Mostly sideways action this week for Kiwi pairs, starting with gains against the majors (possibly higher with the Aussie on higher iron ore prices) but low volatility trade early in the week despite a couple of weak updates on services PMI and consumer sentiment (both leading indicators).
Light broad pressure came on Wednesday as the Kiwi traded lower with the Aussie after RBA assistant governor Michele Bullock commented on the risks that Sydney’s apartment market posed, taking the majority of Kiwi pairs into the red before the big event for all markets this week: the FOMC monetary policy meeting and statement. This event shook up the markets as the Fed surprised traders by setting the expectations of no further rate hikes in 2019 (previous two were expected) and ending the balance sheet run-off in September. This sparked both a hit to global bond yields and the Greenback, as well as a momentary burst of risk-on sentiment in equities and high-yielding currencies like the Kiwi.
Following the FOMC event, we saw one more uniform spike higher in Kiwi pairs thanks to the latest GDP report from New Zealand. The report showed a rebound in the fourth quarter of 2018 to 0.6% growth from a 0.3% read in the third, but the year-over-year data showed a step back in the growth rate to 2.3% from an expected read of 2.5% and 2.6% in the previous quarter.
That’s about where Kiwi pairs topped out for the week as they generally saw pressure going into Thursday and Friday, likely due to a combination of renewed fears of slowing global growth (sparked by European PMI’s), the ongoing Brexit drama (didn’t get the longer Brexit extension), and some U.S. negotiators seeing China push back on trade vows all sparking risk-off sentiment in the financial markets. Global equities and bond yields fell across the board going into the weekend, but fortunately for Kiwi bulls, the New Zealand dollar weathered the storm enough to beat out the major currencies with exception to the safe haven Swiss franc and Japanese yen.