The New Zealand Dollar (NZD) recently suffered a decrease to 0.5990, ending a three-day steady increase. This was a result of discouraging domestic economic data and unsuccessful interventions from the Reserve Bank of New Zealand (RBNZ). Even with the promising rollout of the COVID-19 vaccine, the NZD was unable to recover, landing a blow to investor sentiments. The optimism of investors received a further blow as the NZD/USD pair closed at a lower rate of 0.5990 compared to the previous close of 0.6022.
This decline can be attributed to crucial data like the ANZ – Roy Morgan Consumer Confidence index, and Business Confidence, both of which demonstrated significant decreases. These indicators provide valuable insight into public sentiment towards the economy and hint at potential future movements. The negative turn suggests concern towards business conditions and the overall economic outlook. It implies that consumers and businesses are less likely to make significant purchases or take risks, potentially leading to a slowdown of economic activity.
In particular, the ANZ – Roy Morgan Consumer Confidence index dropped to 86.4 in February from 94.5 in January 2022.
Decline of New Zealand dollar explained
Business Confidence experienced a drastic fall, reaching 22.9 in March from a previous score of 34.7. These sharp declines indicate a concerning change in consumer and business sentiment in the early months of 2022.
This downward trend coincides with the New Zealand market’s preparation for Good Friday and Easter Monday holidays, and is in synchronization with China’s commitment to support comprehensive economic globalization at the Boao Forum for Asia (BFA). This confluence of events suggests that decreased trading activity is anticipated due to the upcoming public holidays.
Additionally, the US Dollar (USD) – a fundamental trading partner of New Zealand – has been exhibiting weak momentum. Investors are closely monitoring US economic indicators, including the Q4 2023 Gross Domestic Product Annualized data and Personal Consumption Expenditures for February. Furthermore, the potential changes in the Federal Reserve’s monetary policy are being eagerly tracked by market watchers.
Volatility in currency markets is expected to heighten due to the uncertainties surrounding future US economic performances. Investors are on high-alert, awaiting these key events and data releases, as the future trajectory of the market heavily lies on the Federal Reserve’s upcoming decisions.
