Market News & Analysis
Fiscal Stimulus coming soon to an economy near you - NZD
Tony Sycamore December 3, 2019 11:55 AM
As markets enter the home stretch for 2019, strategy teams at global banks continue to take the temperature of the global economy to framework their thoughts and outlooks for the year ahead.
Central to forecasts for 2020, an assessment as to whether the adjustments central banks have made to monetary policy have been sufficient enough to offset U.S. -China trade war uncertainties. And perhaps more importantly, how long it will be before the cavalry arrives in the form of fiscal stimulus.
On this matter, the prospect of fiscal stimulus appears closer than previously thought in several countries including New Zealand after the government announced it intends to take advantage of low borrowing costs and bring forward a “significant” amount of spending on infrastructure projects. More details are expected to be unveiled in next month’s Half Yearly Economic and Fiscal Update (HYEFU).
The government’s announcement comes shortly after a run of much better than expected economic data including retail sales and business confidence numbers last week. All of a sudden there is a real prospect of a significant fiscal boost at the same time signs are emerging that the New Zealand economy is responding to the RBNZ’s 75bp of interest rate cuts from earlier this year. Little wonder then why the NZDUSD was an outperformer overnight.
Last week we spoke about the positive technical outlook for NZDJPY and there is now a bullish set up in the NZDUSD following the break and close above key resistance .6455/70 area overnight. Technically we feel the NZDUSD can now continue higher towards resistance from the 200-day moving average at .6540/50 and possibly towards the .6580/.6600 resistance zone that comes from a number of spike highs and lows from earlier this year.
In a nutshell, I favour buying dips in the NZDUSD in coming sessions towards support at .6480/60 with a stop loss stop placed below .6420. The target for the trade is initially .6540/50 before .6600c.
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