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Majority of the NZD crosses have been spiking considerably higher on the back of kiwis growth data.
The New Zealand economy advanced 1.0 percent on quarter in the second quarter of 2018, above 0.5 percent in the previous quarter and market expectations of 0.7 percent. It was the largest quarterly rise in two years, as 15 of the 16 industries expanded. ANZ has been slightly under the market median estimate, at 0.7% q/q. As always, the GDP data is dated, relating to activity in the April, May and June while we are approaching the end of Q3.
Nevertheless, the data matters for the market because it determines the starting point for the Reserve Bank’s estimate of the ‘output gap’ (spare capacity in the economy) and thus the medium-term track for inflation.
In its August Monetary Policy Statement, the RBNZ sounded less than confident about getting core inflation sustainably up to the target midpoint in an acceptable timeframe, so any GDP disappointment would likely be seized upon by a market that is already pricing roughly 40% odds of an OCR cut in the next 12 months. On the flip side, a number approaching 1% might see the priced odds of cuts reduced – depending on how important temporary factors are proven to have been.
NZDUSD: This pair has continued its bullish rout, surged above 0.6697 levels, potential for further gains to 0.6725 (late Aug peak) if risk sentiment remains upbeat.
NZDJPY: This cross has pushed meaningfully higher and back over 75. It is sitting right at downtrend resistance here. Support 74.40 Resistance 75.30.
AUDNZD: Bears of this pair have extended further from yesterday’s close of 1.0904 to the current 1.0888 levels.
The strong GDP data has helped the NZD continue to outperform. It has pushed up through resistance and has momentum here.
Currency Strength Index: FxWirePro's hourly NZD spot index is flashing at 74 levels (which is bullish), while hourly JPY spot index was at -107 (bearish) while articulating at (09:23 GMT). For more details on the index, please refer below weblink:
