Where Is NZD/USD Heading After the Q2 GDP Report?

Posted Thursday, September 21, 2023 by
Skerdian Meta • 2 min read

Risk assets have been declining for a couple of months as sentiment has been unfavorable in the financial markets. By continuing to raise rates, a less dovish FED has contributed to the strengthening of the USD. As a result of the most recent data, traders anticipate one more 25 bps rate increase in November. While commodity currencies have been struggling, the USD has been backed by stronger economic numbers and signals, tempting investors searching for a safe-haven currency.

In addition, China’s economy has seen some unanticipated negative events this year that have put pressure on risk assets. NZD/USD plunged below 0.58, while AUD/USD fell below 0.64. However, in recent weeks, the Chinese economic data has shown some encouraging trends, which has improved risk sentiment.

In the last two weeks, we were seeing some bullish momentum, although the buying pressure was weak and the retreat in the USD helped as well. But, yesterday the FOMC meeting brought an end to this retrace, as they gave the USD a boost and risk assets reversed lower as markets received the signal for the “higher-for-longer” scenario, meaning the FED will keep rates at elevated levels for an extended period of time.

NZD/USD approached 0.60 but failed to reach that major level and reversed below it, losing around 70 pips in a couple of hours. Today we had the Q2 GDP report from New Zealand, with expectations for a 0.4% expansion after two negative quarters which means recession.

New Zealand Q2 GDP Report

Q2 GDP QoQ 0.9% vs 0.4% expected
Q1 GDP was -0.1%
GDP YoY 1.8% vs 1.2% expected
Prior GDP YoY was 2.2%
“Business services was the biggest driver of economic growth this quarter, largely due to computer system design,”
Several other industries also contributed to the growth this quarter, including: public administration, safety, and defense rental, hiring, and real estate services electricity, gas, water, and waste.
Transport equipment and machinery manufacturing drove higher activity in the manufacturing industry
Manufacturing activity increased this quarter after five consecutive quarters of decline.
“Following the impacts of Cyclone Gabrielle, both education and transport, postal, and warehousing grew this quarter after a decline in the March quarter. Agriculture, forestry, and fishing, which was also impacted by extreme weather events, fell in both the March and June quarters,”
Exports rose 5.0 percent, led by higher dairy, forestry, and meat exports.
Household spending grew 0.4 percent this quarter driven by increased spending on durables, including motor vehicles and audio-visual equipment.
Increases in exports, household spending, and investment resulted in a decrease in stock levels, particularly affecting motor vehicle and forestry inventories.