NZ dollar extends losses ahead of RBNZ report

The New Zealand dollar continues to lose ground on Wednesday and is trading at 0.6139, down 0.49%. NZD/USD touched a low of 0.6124 on Tuesday, its lowest level since May 2020. The US dollar has pummelled the New Zealand currency, with NZD/USD sliding 370 points since June 1^st.

RBNZ Statement of Intent next

The Reserve Bank of New Zealand has not been shy about raising rates, and the aggressive rate-hike cycle is set to continue. The RBNZ meets next Wednesday, and the markets have priced in a 50bp increase, which would bring the cash rate to 2.50%. With a peak in inflation nowhere in sight, the RBNZ can be expected to remain hawkish until inflation is contained. Interest rates could hit 3% in August and rise as high as 4% if inflation does not ease lower.

The RBNZ will release a Statement of Intent on Tuesday and should be treated as a market-mover. The report will outline the central bank’s objectives over the next three years, and investors will be looking for insights regarding upcoming rate moves.

Confidence indicators have been heading southward, raising concerns about the health of the economy. The NIEZR Business Confidence index fell ever deeper into negative territory on Monday, with a reading of -65 for Q2. Business confidence is currently at its lowest level since Q1 2020, at the start of the corona pandemic. Economic activity has been curtailed due to the acceleration of Covid cases, and businesses continue to struggle with cost pressures and higher interest rates. This follows last week’s ANZ Business Confidence in June, which fell to -62.6, down from -55.6 in May, marking a 12^th straight decline and a near-record low.

Consumers are also feeling the bite of the cost of living crisis, as food and petrol prices have soared. Higher interest rates have meant higher borrowing costs and mortgage rates, leaving consumers with less disposable income and less confidence about their economic situation. The Westpac Consumer Confidence fell sharply to 78.7 in Q1, down from 92.1 in Q4 2021.

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NZD/USD Technical

• NZD/USD has weak support at 0.6126, followed by 0.6047
• There is resistance at 0.6226 and 0.6305

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