NZ Q4 GDP to showcase a two speed economy NZD/USD
Tony Sycamore March 16, 2021 12:25 PM
Following Thursday mornings FOMC meeting (5.00 am AEDT) attention will switch to an Antipodean data double header in the form of New Zealand Q4 GDP (8.45 am AEDT), and Australian labour force data for February (11.30 am AEDT).
The New Zealand economy is currently running at two differing speeds. Housing prices have surged over the last three months, prompting the reintroduction of LVR restrictions.
To further cool the housing market, the New Zealand Government has taken the unorthodox step of instructing the RBNZ to take into account housing prices when setting monetary policy, in addition to its primary inflation and employment objectives.
The inclusion of housing prices in the RBNZ’s mandate in theory works well when the economy is strong and able to accommodate higher rates designed to take the sting out of the housing market.
However, the job becomes more difficult when the property market is surging and the rest of the economy has slowed as data has shown since the end of 2020.
At the heart of the slowdown, New Zealand has endured a summer of no tourists as international borders remain closed. The absence of international tourists and students has left its mark.
As a result, Q4 GDP is expected to rise just +0.1%, following a 14% rebound in Q3. Furthermore, tepid growth is likely to continue in Q1 2021, exacerbated by two “level 3” lockdowns in Auckland over the past month.
What does this mean for the NZD/USD?
With the reflation trade still the main driver of the commodity currencies, the NZD/USD is expected to shrug off a soft GDP number on Thursday.
Technically, the triple bottom that formed at the .7100c lows was an initial warning that the correction from the February .7465 high was complete and that a rebound was close by.
Providing the NZD/USD does not retrace back below key support .7100c, we favour long NZD/USD positions on dips back to the .7180/60 support, in expectation of a move towards resistance at .7300/20, before a retest of the February .7465 high.
Source Tradingview. The figures stated areas of the 16th of March 2021. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.