NZDUSD Opens Door for 2022 Lows, As NZ Retail Sales Slump Ahead of RBNZ Rate Cut
NZDUSD broke below the support level at 0.8550 on Friday, opening the door for the 2022 low at 0.7470, with fundamentals not helping the Kiwi much, as the data continues to disappoint.
The NZD/USD exchange rate has remained largely confined to a five-cent range for most of 2024, fluctuating between 0.8550 at its lowest and the upper limit in the 0.6370s. However, recent months have seen the pair come under pressure due to contrasting economic dynamics in the US and New Zealand.
NZD/USD Chart Weekly – The Support at 0.8550 Might Turn Into Resistance
Weak economic indicators from New Zealand, including rising unemployment and declining inflation expectations, have reinforced the Reserve Bank of New Zealand’s (RBNZ) dovish stance, increasing the likelihood of further depreciation in the NZD. The RBNZ is expected to announce a 50 basis point rate cut at its upcoming meeting on Wednesday. This outlook follows a notable retreat in the exchange rate, which dropped below the support level at 0.5850 after failing to breach resistance in late September. Despite attempts to hold above this support level earlier this month, bearish sentiment prevailed, with the so-called “Trump Trade” favoring the US dollar, thus pushing this forex pair below this key levels.
Adding to the bearish outlook, New Zealand’s Q3 retail sales data, released last night, confirmed another contraction, highlighting ongoing economic struggles. This further supports the case for the RBNZ’s anticipated rate cut.
New Zealand Retail Sales Report for Q3
- Quarterly Retail Sales:
- Retail sales declined by 0.1% quarter-on-quarter (q/q) in Q3, better than the -0.5% expected but still reflecting a contraction.
- This marks an improvement from the -1.2% q/q recorded in Q2, indicating a slower pace of decline.
- Yearly Retail Sales:
- On an annual basis, retail sales fell by -2.5% year-on-year (y/y) in Q3.
- This is a slight recovery compared to the -3.6% y/y contraction seen in Q2 but remains in negative territory.
- Sector Performance:
- Key retail sectors, particularly durable goods, experienced persistent weakness, reflecting reduced consumer confidence and spending.
- Food and beverage sales provided some support but were insufficient to offset broader declines.
- Economic Context:
- Rising unemployment and declining wage growth continue to weigh heavily on household spending.
- The Reserve Bank of New Zealand’s (RBNZ) dovish policy and anticipated rate cut this week are aimed at mitigating these challenges.
While New Zealand’s Q3 retail sales showed a slower rate of decline compared to the previous quarter, the ongoing contraction highlights persistent challenges in the economy. Weak consumer demand, coupled with external economic pressures, underscores the need for supportive monetary policies. The data adds to the case for the RBNZ’s expected 50-basis-point rate cut this week as policymakers aim to revive economic activity and stabilize retail trends.
NZD/USD Live Chart
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