New Zealand Dollar, Business Confidence Talking Points:
- NZD/USD spiked up after the September ANZ report
- Overall, it was still pretty gloomy
- However, it wasn’t as bad as August’s disaster
Find out what retail foreign exchange traders make of the New Zealand Dollar’s chances right now at the DailyFX Sentiment Page.
The New Zealand Dollar rose on Wednesday thanks to news that domestic business confidence deteriorated no further from its previous, very weak levels. September’s index from the Australia and New Zealand Banking Group came in at -38.3. At face value that’s a gloomy-enough print but it was at least much better than the horrific, ten-year low of -50.3 chalked up in August.
Weak confidence has been a major worry for the New Zealand for months, to the extent that the government has set up a standing committee to deal with it. This latest data may at least raise hopes that matters are getting no worse.
The report’s details were still decidedly mixed. Firms’ investment intentions came down further, but employment intentions rose, as did profit expectations. ANZ called the survey a weak growth signal overall.
Still, the activity outlook index rose to 7.8, from August’s 3.8. All up the key takeaway from this survey is that a net 38.8% of respondents were gloomy about the economy over the next twelve months, with a net 7.8% expecting their own businesses to grow. On that basis, it’s hard to see the NZD/USD reaction as any more than knee-jerk relief.
On its daily chart, the New Zealand Dollar has just failed in another upside test of its pervasive downtrend. That trend has deepened through 2018 as the interest rate differential between New Zealand and the US has swung into to the US Dollar’s favor for the first time since the financial crisis.
With US rates apparently to rise once again on Wednesday, and perhaps once more before the end of this year, the greenback is likely to remain in the driving seat. The New Zealand Offiical Cash Rate remains at its post-crisis record low of 1.75% and is not forecast to rise until well into next year at the earliest.
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--- Written by David Cottle, DailyFX Research
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