New Zealand Dollar, Retail Sales Talking Points:
- Third quarter sales came in well under market hopes
- Consumer were hit by higher fuel costs
- NZD/USD was hit, but remains for now above the year’s previously dominant downtrend
Fourth-quarter technical and fundamental forecasts from the DailyFX analysts are here.
The New Zealand Dollar was hit hard Monday by official retail sales figures which badly missed forecasts.
The third-quarter saw sales flat compared to the previous three months, when the markets had hoped for a 1% rise.
The annualized gain was 2.7%. It seems that rising fuel prices have taken a toll on discretionary spending elsewhere, with reduced demand especially notable in the hospitality sector.
NZD/USD dropped after the release. New Zealand’s battered business confidence has long been a source of deep worry for policy makers. This latest sign that consumer sentiment may be joining it in the doldrums is clearly bad news for bulls.
The key Official Cash Rate at the Reserve Bank of New Zealand remains at its record low of 1.75%. The markets did not think there was much prospect of it rising anytime soon before these figures. That view will not have changed.
Admittedly NZD/USD remains above the daily-chart downtrend line which dominated trade for much of this year, only to break at the end of October. However, this break arguably had as much to do with market reassessment of likely US interest-rate rises ahead as with anything to do with New Zealand’s domestic economy.
Similar trend-breaking price action has after all been seen in AUD/USD. It looks as though that impetus has now peaked and, with both the Kiwi and the Aussie still utterly bereft of likely interest rate support, bulls of either may well struggle to maintain altitude.
This market will focus especially on this week’s meeting of the Group of 20 leading industrial economies in Argentina. Like Australia, New Zealand is caught in the crossfire of the trade spat between China and the US and will hope for signs of progress at the get-together. Both countries have vast trade links with China but rely heavily on the US for security cooperation. This cannot be a comfortable position at the moment.
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--- Written by David Cottle, DailyFX Research
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