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NZD/USD Analysis: Kiwi Dollar Pushes Higher on Strong Q2 GDP Data

NZD/USD Analysis: Kiwi Dollar Pushes Higher on Strong Q2 GDP Data

Brendan Fagan, Contributor


What's on this page

NZD/USD, New Zealand Dollar, New Zealand GDP, RBNZ – Talking Points

  • Q2 GDP jumps 17.4% YoY & 2.8% QoQ, well surpassing expectations
  • Auckland remains under strict lockdown to curb recent surge in Covid cases
  • NZD/USD pushes higher on the back of strong data, eyeing 0.7150

New Zealand posted strong results for second-quarter gross domestic product, well surpassing growth expectations on quarterly and yearly timeframes. GDP grew by 17.4% year-over-year, surpassing the expectation of 16.3% growth. On a quarterly basis, New Zealand saw GDP growth of 2.8% despite the recent Covid outbreak. In immediate trade, NZD/USD popped higher to 0.7139. Such strong data may play into the hands of the Reserve Bank of New Zealand, which was set to raise interest rates prior to the recent Covid outbreak. An appreciation in the Kiwi Dollar may reflect the increasing probability of RBNZ tightening in the near term.

Weaker than expected retail sales and industrial production data from China weighed on the Kiwi Dollar during the APAC session on Wednesday, but that sentiment reversed as the US Dollar could not follow Treasury yields higher during the US cash session. Dollar weakness allowed for risk-on FX to gain, with the Kiwi-Dollar cross trending higher from the opening bell in New York.

Despite consolidation in early September, NZD/USD may look to explore higher prices with the Reserve Bank of New Zealand prepared to raise rates. The major challenge for sustained upside momentum for NZD/USD remains the September FOMC meeting. A hawkish shift in policy highlighted by a taper announcement could see USD strength sweep across the FX landscape, perhaps taking the pair lower to a key support zone above 0.6900.

NZD/USD Daily Chart

Chart created with TradingView

As previously mentioned, the RBNZ is prepared to raise interest rates as the pandemic dies down in New Zealand. With the central bank simply waiting for the recent Covid outlook to subside, a rate hike is highly probable given the current calculus . With tightening likely on the way and the formation of a potential bull flag on the daily timeframe, fundamental and technical inputs indicate that NZD/USD may want to explore higher prices in the near-term. Following tonight’s data print, eyes will begin to shift to the RBNZ policy meeting on October 6.

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New Zealand Economic Calendar

Courtesy of the DailyFX Economic Calendar

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--- Written by Brendan Fagan, Intern

To contact Brendan, use the comments section below or @BrendanFaganFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.