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Kiwi Rallies on Better Than Expected GDP

Published September 21, 2018

The NZD opens the day over 1% higher as better than expected Q2 GDP data gave the local currency a boost yesterday. The Kiwi built on these gains overnight benefitting from improved risk appetite and weakness in the USD. Markets are generally in a more buoyant mood after President Trump opted for more moderate tariffs on Chinese imports than had been anticipated. The USD and JPY are both under pressure as risk based currencies such as the NZD and AUD continue to rally.

NZ GDP Surprises Market

The Kiwi Dollar spiked higher in local trading yesterday as Q2 GDP data showed the NZ economy grew by 1% in the June Quarter, making for a 2.7% gain for the year. This compares with a Reserve Bank forecast of 0.5% for the quarter, and market expectations of a 0.8% increase. The quarterly increase was the highest in five years, and will have tempered fears that recent falling business confidence would weigh on growth and prompt the RBNZ to consider an interest rate cut. There will now be much interest in the next business confidence survey results to be published on September 26th, and more importantly the RBNZ will make its next OCR announcement on September 27th. While no change in rates is expected, the language used by Governor Orr will be monitored closely for any changes in the RBNZ outlook.

The NZD is up against all major currencies with close to 1% gains against the USD, AUD, and JPY.

Next Week

Some big data releases and announcements in the calendar for next week, including the US FOMC interest rate decision early Thursday morning, followed by the RBNZ a few hours later. The next day sees US Q2 GDP numbers and Euro Zone CPI. No doubt there will also be further developments in the ongoing US-China Trade stand off.