NZD Weekly Review (May 18 – 22)

NZD Weekly Review (May 18 – 22)

The New Zealand dollar easily takes the top spot this week thanks to a round of positive global risk sentiment, combined with surprisingly not-so-dovish commentary from the Reserve Bank of New Zealand.

Traders got relatively bullish on the Kiwi as we saw the possibility of more stimulative actions coming from the RBNZ shifted to 2021 from later in 2020.

Overlay of NZD Pairs: 1-Hour Forex Chart
Overlay of NZD Pairs: 1-Hour Forex Chart
NZD Weekly Performance from MarketMilk
NZD Weekly Performance from MarketMilk

New Zealand Headlines and Economic data

Monday:

ANZ economists now predict the Reserve Bank will increase the quantitative easing programme to $90 billion by August if not sooner
Global risk sentiment started the week in the “on” position to help lift the Kiwi early, thanks to several catalysts: Moderna reports positive data on early-stage coronavirus vaccine trial, weekend comments from Fed Chair Powell to reiterate unlimited stimulus support, positive signs of the global economy returning to pre-covid levels.

Tuesday:

Prices drop for New Zealand’s sheep and beef farmers
RBNZ doubles down on promise to keep OCR at 0.25% until March
RBNZ not expanding quantative easing programme any time soon
RBNZ official says negative rates have ‘bad rap’
Another positive session for the Kiwi, thanks to the shift in expectations of when we might see the next round of stimulus from the RBNZ,  and likely due to a continuation of Monday’s driving themes. But we did see the Kiwi pullback during the U.S. session as risk sentiment shifted negative on Moderna vaccine news and more U.S.-China tensions (US could delist Chinese companies).

Wednesday:

RBNZ Governor Adrian Orr doesn’t want to the OCR (official cash rate) to go negative at this point

  USD/JPY eases from intraday high, still beyond 107.50, on upbeat Japan data dump

Thursday:

New Zealand Opens Bars as More Curbs Eased, Four-Day Work Week Idea Floated
Westpac changes call on RBNZ rates, sees rate cut only in 2021

RBNZ Increases Pressure on Banks to Lower Mortgage Lending Rates
RBNZ Chief Economist Yuong Ha speech – OCR on hold until March 2021
Risk sentiment moved negative on more U.S.-China tensions (White House report criticizes China’s economic policies, human rights violations) and weak U.S. economic updates (U.S. jobless claims total 2.4M) during the U.S. session, likely the spark for the Kiwi’s quick move lower.

Friday:

Adrian Orr: More QE would be the ‘simple’ way for the Reserve Bank to boost the economy; Going further and getting the Bank to directly finance government initiatives would be ‘achievable’
New Zealand Q1 headline retail sales down 0.7% vs. projected 1.5% slide
The Kiwi drifted lower against the safe havens during the Asia session as risk sentiment continued in negative mode, once again U.S.-China tensions (China Will Fight Back if U.S. Intervenes in Hong Kong, Beijing Warns)

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