NZD/USD Continues to Head toward 0.66 After Employment Figures

Posted Wednesday, August 2, 2023 by
Skerdian Meta • 1 min read

NZD/USD has been declining since the middle of last month, making lower highs, and after a decent retrace higher in the last few days of July, this pair has resumed the decline again this week, as the sentiment remains negative for commodity dollars. The economic situation in China has been showing a slowdown which puts commodity dollars under pressure, while other fundamentals are also supporting the downward momentum here.

The Federal Reserve (Fed) raised its interest rates by 25 basis points last Wednesday, in line with expectations, and maintained its policy statement unchanged. However, the market was hoping for more clarity on the future policy path, but FED Chair Jerome Powell reiterated that their decisions will depend on economic data. The next day, the US unemployment claims numbers surpassed expectations by a significant margin, suggesting further tightening in the US jobs market, which led to a surge in the US dollar. As long as US economic data remains strong, the USD is expected to continue appreciating, and the Q2 GDP report confirmed that as it jumped to 2.4%.

On the other hand, the Reserve Bank of New Zealand (RBNZ) decided to keep its official cash rate unchanged and stated that it will remain at a restrictive level for the foreseeable future to ensure inflation returns to the target level. Despite the recent higher-than-expected inflation data in New Zealand, the central bank is likely to maintain its current interest rate stance at the next rate decision, although they might face some pressure due to the inflation surprise. Today the employment numbers from New Zealand