The New Zealand dollar is stronger for two days in a row to the USD until it reaches the level of 0.7020. That was happened in the trading at the end of this month. What is the cause?
The cause is a statement made by the leader of the Federal Reserve which has a wide impact. However, the analysts warned that Kiwi is usually weakening to some other major currencies in August.
The analyst from Citi Bank told his client that the New Zealand Dollar is weaker than the Pound and USD in August. It is because the movement since 2010 has been showing something.
The NZD performance declined versus the GBP and USD in eight from the ten in August. On the rest of two, the NZD Doesn’t show any significant strength in the market.
The NZD/USD Falls in The G10 Currency Room
The NZD/USD falls in the G10 currency room in August wity the higher risk evasion than the the other months. The August monthlu cycle is actually a kind of an anomaly.
Besides that, they dont see any clear reason. The New Zealand dollar is classified as a high-performing currency, which means it has a positive correlation with global market sentiment.
As global market sentiment improves, high risk assets such as stocks and NZD will quickly strengthen. Whereas when sentiment>>p deteriorates, these assets will also weaken faster.
The seasonal cycle is not the standard barometer for the forecast of currency exchange rate movements. However, an analyst predicts something due to this aspect.
The RNBZ Meeting May Not Have a Significant Impact
The weakening of the NZD in line with this seasonal cycle is likely to recur next month. That can happen unless US equities show a stronger-than-average performance in the market.
They maintain their constructive point of view about NZD in a middle term period. However it will need more time for this currency to reach its lowest point before it is strengthening again.
Citi also predicts that the New Zealand central bank's (RBNZ) meeting on August 18 will have no significant effect. In fact, the RBNZ has just discontinued its bond-buying program.
That is done at its policy meeting this month and is likely to start raising interest rates in the near future. Elsewhere, greenback faces the continued hits for a week this time.
Greenback is Underpressured
Greenback experiences the continuous hits in a week. Before, it was pressured by the Fed’s statement on Wednesday. Then this currency is also pressed by the United States data release.
That was far from the expectation on Thursday. The index of USD (DXY) felt to the lowest record in a month around the level of 91.82 in a trade this Friday period.
That worse condition started when The Fed leader stated that the interest rate increase is still far. He thinks that the America’s economy still needs the support of the monetary stimulus.
That is needed to reach the employment target and Inflation which are wanted by the central bank. The USA GDP data release some few hours ahead just like confirming that dovish attitude.
The GDP Report Shows Some Data
The GDP report shows that the United States economy grows by 6.5 percent quarter – over – quarter in the quarter of II/2021. It is caused by the massive fiscal stimulus which is shared by the federal government.
However, that growth fails to fulfill the expectation of the economist which is targeted on 8.5%. The Fed continues to say that they will reduce the money printing program.
The Fed goes to this direction and it is seemed slower than what market is expexted before. The careful attitude showed by The fed is caused by a slow down in several sectors.
Those are like slow USA economy growth, the inflation loosened, and the concern about the delta varian. The economist are not too dissaponting by those numbers.
