The New Zealand dollar has been strengthening for the fifth consecutive day with the US currency: the NZD/USD pair has already updated 4-month highs, getting close to the 66th figure. Despite the multi-day upward movement, the growth impulse does not fade away - and today it can receive a certain boost if the US Nonfarm comes out worse than expected. But here it is worth emphasizing that the NZD/USD pair is growing, mainly not due to the greenback's weakness, but in connection with the general strengthening of the New Zealand currency. The Reserve Bank of New Zealand, which actually pulled down the kiwi this summer, is now pushing the national currency to new price heights, demonstrating an optimistic mood. Macroeconomic statistics also support the pair, determining the upward trend.
The NZD/USD pair began its upward movement on Monday, when the US dollar fell throughout the market. Amid Trump's angry tweets about the Federal Reserve and its introduction of duties on all steel and aluminum from Brazil and Argentina, the extremely weak US manufacturing index ISM came out. This release only added to the negative fundamental picture for the dollar. Instead of projected growth, the indicator remained below the key 50-point mark, and went in the red zone, reaching 48.1 (for comparison: this indicator reached 59.3 in November last year). Such weak dynamics raised the pressure on the US currency, making it possible for the New Zealand dollar to show its dominance in the pair.
In addition, New Zealand macroeconomic reports provided support for the pair. On Monday, the terms of trade index was published (it is defined as the ratio of the export price index to the import price index) - the indicator came out better than expected and updated it's almost three-year high, reaching 1.9%. The last time this indicator was at similar heights was back in the first quarter of 2017. The commodity price index from ANZ was in the green zone, which indicates a change in the level of prices for raw materials, estimated at world prices. It is published immediately after the end of the month and makes it possible for you to quickly assess the situation of exporters. So, this indicator also updated multi-year highs, reaching 4.9%. Prior to this, NZD/USD traders were pleased with retail sales in New Zealand , which increased by 1% in the third quarter, exceeding the forecasts of most experts. It is noteworthy that in the previous quarter this indicator barely exceeded the zero value (+0.2%).
Despite the growth of macroeconomic indicators, the head of the RBNZ Adrian Orr, who voiced quite optimistic theses this week, became a kind of trigger for the kiwi's growth. Here it is worth recalling the events of this summer, when without any clear warning, the RBNZ reduced the rate immediately by 50 basis points. After that, the central bank members repeatedly hinted at similar steps in this direction, so theNZD/USD pair was under pressure for several months. In particular, on the eve of the November meeting, the probability of a rate cut to 0.75% was almost one hundred percent. This fact has already been largely taken into account in current prices. Experts mainly discussed another dilemma, which was to determine the future prospects of monetary policy. According to some analysts, the central bank will not rule out a rate cut to 0.5% at the beginning of 2020; according to others, the regulator will limit itself to the November decrease, then putting the issue of easing monetary policy on hold.
But contrary to these forecasts, the RBNZ members, firstly, left all the parameters as they were, and secondly, having "done nothing more" stated that the situation in the country's economy after the August meeting was stable and did not require changes in monetary policy parameters.
This week, Adrian Orr actually confirmed that the regulator paused the issue of lowering the interest rate, while improving the forecast for economic growth next year. In addition, he said that the government will increase infrastructure spending in 2020. Orr also expressed the hope that the United States and China will conclude a trade agreement in the near future, and that the Brexit issue will be resolved after early elections to the House of Commons. These factors, according to the head of the RNBZ, will reduce the overall geopolitical tension and contribute to the growth of the global economy, having a positive effect on the economy of New Zealand.
Thus, the New Zealand dollar received a kind of postponement - the RBNZ paused the issue of lowering the interest rate, and did not define the time frame for this pause. Meanwhile, the US dollar continues to lose ground, amid concerns about the Fed's possible actions early next year. All this makes it possible for the NZD/USD pair to enter the 66th figure. If today's Nonfarm comes out in the red zone, the pair can already test this level today. It is also worth noting that the nearest resistance level is at 0.6640 - this is the lower boundary of the Kumo cloud on the weekly chart.
