New Zealand Dollar At Risk As Pessimism Grows
The New Zealand economic docket doesn’t hold the event risk of the past week with consumer confidence and credit card spending on tap. Nevertheless, following a disappointing retail sales report a decline in credo=it card spending could cast doubt on a RBNZ rate hike. Overnight index swaps went from pricing in 134 bps to 122 bps of tightening in the next year following the disappointing inflation report. If yield expectations fall further it will leave the “kiwi” at the mercy of broader trends. Considering that U.S. equity markets dropped over 2.5%, we could see a rocky start to the week as Asian markets play catch up. Conversely, positive earnings could set the stage for a rebound in risk sentiment and put the NZD/USD on pace to test recent highs. Traders also need to be conscious of the upcoming results from the stress test on European banks on July 23rd. Although the report will be released at the end of the week, speculation on the outcome could impact sentiment in the meantime. - JR
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