New Zealand dollar slides as consumer confidence stays weak

• NZD/USD is down 1.3% this week
• New Zealand consumer confidence rises
• Powell to testify before a House Committee on Wednesday

The New Zealand dollar is sharply lower for a second straight day. In the North American session, NZD/USD is trading at 0.6148, down 0.83%.

New Zealand consumer confidence rises

New Zealand Westpac consumer confidence accelerated to 83.1 in May, up from 77.7 in April and above the consensus of 76.2 points. Still, this is a low level as consumers remain pessimistic about economic conditions. The Westpac survey found that even though household incomes were higher due to strong wage growth, household finances were squeezed for two reasons. First, the cost-of-living crisis has hurt households, with inflation climbing 6.7% over the past year. Second, high interest rates have impacted on many households as mortgage rates have shot up.

Weak consumer confidence, which could well translate into a drop in consumer spending, would not be bad news at all for the Reserve Bank of New Zealand, which needs the economy to slow in order to pause interest rate hikes. The benchmark rate currently stands at 5.50% and the RBNZ meets next on July 12th. Last week’s GDP report for the first quarter showed growth contracted by 0.1%, which means that technically New Zealand is in a recession, with two consecutive quarters of negative growth.

In the US, this week’s data calendar is very light. There are no tier-1 releases on Tuesday and the markets are looking ahead to Wednesday, with Jerome Powell testifying before the House Financial Services Committee. Powell will likely be grilled by lawmakers on the Fed’s unconventional interest rate path, as the Fed paused last week after ten straight hikes but has signalled that it plans to renew hiking at next month’s meeting.

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NZD/USD Technical

• NZD/USD is putting strong pressure on support at 0.6147. Below, there is support at 0.6056
• 0.6198 and 0.6276 are the next resistance lines

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