New Zealand dollar jumps on strong GDP

The New Zealand dollar has climbed higher on Thursday. Currently, NZD/USD is trading at 0.7162, up 0.72% on the day.

New Zealand GDP breezes past forecast

It had been a relatively quiet week for the New Zealand dollar, but that all changed on Thursday, as NZD/USD rose sharply in response to an excellent GDP reading for the third quarter. The currency is up 2.0% percent in December and is trading at levels not seen since April 2018.

New Zealand is among the last of the major economies to publish GDP reports, but the economy followed the trend we have seen elsewhere – a sharp contraction in Q2, followed by a strong rebound in Q3. New Zealand registered a double-digit loss in Q2, at 12.2 per cent. The street consensus was for a gain of 12.9%, which would have more than recouped the second-quarter losses. However, the bounce-back of 14.0% indicated that growth in Q3 was much stronger than expected. The country has clamped down on Covid and consumer spending has been strong. However, with foreigners banned from entry, tourism has collapsed and businesses are in a wait-and-see mode, which has fueled higher unemployment.

The New Zealand dollar has soared against the greenback, shrugging off the government’s fiscal relief package and the possibility that the RBNZ might lower interest rates into negative territory. On Wednesday, Finance Minister Robertson said that the country’s budget deficit will be lower than expected, another sign that the economy is moving in the right direction. The US dollar continues to struggle, and with Congress close to reaching an agreement on a massive stimulus deal, the New Zealand dollar appears well-positioned for continuing its upswing.

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NZD/USD Technical

• NZD/USD broke above resistance at 0.7133 in the Asian session. There is further resistance at 0.7178 and 0.7241.
• There is support at 0.7025, followed by support at 0.6962
• The pair had been just above the 10-day MA line all week but has moved higher, away from this line

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