NZD rises despite soft bus. confidence

The New Zealand dollar has extended its gains on Wednesday. In the North American session, NZD/USD is trading at 0.6235, up 0.54%.

Business Confidence slides

New Zealand’s ANZ Business Confidence has been in a deep freeze for months, but things got even uglier in November, with a reading of -57.1. This followed the -42.7 reading in October and missed the consensus of -39.5. The plunge in business optimism comes despite an improvement in the economy and the easing of Covid restrictions. It has been much the same story with consumer confidence, which remains weak. The double-barreled punch of high inflation and rising interest rates has dampened the moods of consumers and businesses, and with inflation running at a 7.2% clip, the Reserve Bank of New Zealand will have little choice but to continue raising rates into 2023.

The Federal Reserve remains in the spotlight, and Fed Chair Powell will be under close scrutiny when he delivers a speech today at the Brookings Institute in Washington. The fact that Powell’s remarks are the center of attention is an indication of just how dependent market movement has become on rate policy. Powell is expected to discuss inflation, which has been losing steam, but the Fed is still not ready to say inflation has peaked. Inflation may have fallen to 7.7%, but as Fed member John Williams warned earlier this week, inflation remains “far too high”. Investors are gearing for the tightening cycle to continue into 2023, but there’s uncertainty, likely shared by Fed members, as to when the rate hikes will end. The most likely scenario is that the Fed will raise rates to about 5%, but inflation, which has been stickier than the Fed expected, will have to cooperate in order for the Fed to wind up the current tightening cycle.

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NZD/USD Technical

• NZD/USD is testing resistance at 0.6209. Above, there is resistance at 0.6331
• There is support at 0.6130 and 0.6008

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