Talking Points:
- New Zealand consumer confidence picked up nicely in May
- But the NZ Dollar paid little attention
- The market is focused on the US, and in any case New Zealand rates will be staying low
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The New Zealand Dollar showed little reaction Thursday to news that consumer confidence in its home country had risen strongly in May.
Major lender Australia and New Zealand Bank’s (ANZ) index on the subject rose 1.8% to 123.9. This was much better than April’s 2.8% fall. ANZ said that the new level “adds up to good times ahead” across the economy, with consumers’ view of their own financial position at its highest levels since the financial crisis.
It said that risks to this sunny view were the prospect of wages rising more slowly than inflation, and some form of property market setback as-yet unknown. The bank also pointed out that retail savings rates were rising as lenders scramble to attract customers – good news for savers perhaps but not so much for borrowers even with base rates at a record low.
At any rate the New Zealand Dollar was torpid on the release. This could be partly because investors remain focused on potential political turbulence in Washington DC, but it may also be because the data will have little if any impact on Reserve Bank of New Zealand plans to keep its monetary policy accommodative.
The RBNZ recently disappointed NZ Dollar currency bulls. It held the key Official Cash Rate at 1.75% in May. That was widely expected. However, the central bank also said some factors behind consumer prices’ strength were likely temporary and that rates will remain low for a considerable time to come. Some in the markets had clearly hoped for more hawkish commentary than that.
--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter: @DavidCottleFX
