- The New Zealand dollar clings to gains as one of the G8 currencies to post gains against the dollar.
- US data underpinned the dollar as manufacturing activity is a tough nut to crack.
- New Zealand building permits surprisingly rose after falling in August.
The NZD/USD rises in the North American session but stays away from daily highs above 0.5900 as a report showed that manufacturing activity in the US although slowing down the economy is expanding which is a wind against for the NZD. However, the possible review of China’s restrictions on Covid-19 and the rise in RBA rates kept the dollar as a safe haven. NZD/USD is trading at 0.5839, up almost 0.50% from its opening price.
Sentiment remains negative, as evidenced by US stocks trading at a loss. As traders prepare for the US Federal Reserve’s November monetary policy decision, a string of US economic data keeps the dollar higher.
As for the data, the Institute for Supply Management reported that October’s Manufacturing PMI grew by 50.2, above the 50 estimate and below September’s 50.9. Earlier, S&P Global released the US PMI, which also expanded at a pace of 50.4, up from estimates of 49.9, signifying that the US economy is about to enter a recession.
At the same time the ISM data was released, the Department of Labor reported that job openings had increased. JOLTS data for September showed vacancies rose by 10.717 million, above estimates of 10 million, topping August’s 10.28 million.
As US data crushed forecasts, expectations of further Fed tightening increased demand for the dollar, in part because of US Treasury yields, specifically the 10-year yield, which jumped above the 4% threshold.
The NZD/USD pair turned down from 0.5880 and hit a daily low at 0.5828 before pulling back and hovering around the R1 daily pivot at 0.5840.
It should be noted that Reuters reported that White House economic advisers Bernstein said that Biden was backing the Fed pivot, which was seen as a dovish signal, sending NZD/USD towards 0.5870. But it was later corrected, and the White House economic adviser meant that Biden was backing the Fed’s pivot to tighten policy, so NZD/USD erased those gains.
On the other hand, the New Zealand data reported during the Asian session helped the NZD to strengthen against the USD. September building permits rose 3.8% month-on-month versus a 1.6% contraction in August, Statistics New Zealand reported. Furthermore, China’s Covid-19 tightening policy review and the Reserve Bank of Australia’s (RBA) 0.25% rate hike gave an additional boost to NZD/USD, which rose from 0.58010 to 0.5909.
What must be considered
New Zealand’s economic calendar will be busy as the Reserve Bank of New Zealand’s (RBNZD) financial stability report is due to be released. Also, third quarter employment data, namely the employment probability, labor cost index, participation rate and a press conference from the RBNZ, would be catalysts that can support the New Zealand dollar.
On the US front, the calendar will feature the ADP Employment Change, a prelude to Friday’s Non-Farm Payrolls, along with the Fed’s monetary policy decision and Jerome Powell’s press conference.
Key NZD/USD Technical Levels
Source: Fx Street
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