Fundamental Forecast for New Zealand Dollar

The New Zealand Dollar finished the week modestly higher against its US namesake, bolstered by a similarly tepid bounce in the US S&P 500 but weighed down by its own economic fundamentals. A NZ Retail Sales report showed the worst month-on-month decline in Core Retail Sales in 14 years. The news of week consumption and disappointing REINZ housing data only served to dampen forecasts for a broader economic recovery, and Reserve Bank of New Zealand interest rate expectations were accordingly lower. Analysts had earlier called for the New Zealand central bank to begin raising interest rates in a short few months, but the truly disappointing consumption figures suggest that the bank may yet wait longer. The net effect was New Zealand Dollar weakness against the resurgent Australian Dollar, but market dynamics could just as easily shift on flare-ups in financial market tensions.

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