New Zealand Dollar rally extends after positive data from China

  • The New Zealand Dollar continues rising on Wednesday as positive news from China helps boost commodity prices.
  • The Kiwi had already rebounded after lower-than-expected US CPI data led to hopes of an end to the global rate-hiking cycle. 
  • NZD/USD breaks to fresh highs and targets the October highs at 0.6055. 

The New Zealand Dollar (NZD) continues to build on the previous day’s gains midweek after a raft of positive growth stories from China, its largest trading partner, boosted the prospects for exports.  

From a technical perspective, the pair’s short-term trend has turned bullish again and is closing in on the key October 2023 highs at 0.6055. 

Daily digest market movers: New Zealand Dollar: China in the spotlight

  • The New Zealand Dollar rallies after data from China lifts the outlook for trade and reverses the recent spate of lackluster readings. 
  • A support package from the Chinese government, amounting to an injection of 1 trillion Yuan in low-cost financing for the beleaguered property sector, also helps allay fears of a credit crunch, according to a report originally from Bloomberg News.
  • Data out early Wednesday morning showed Chinese Retail Sales rose 7.6% in October YoY, squarely beating estimates of 7.0% and 5.5% previously, according to the National Bureau of Statistics of China. 
  • Industrial Production also beat expectations, coming out at 4.6% YoY in October versus consensus estimates of 4.5% and 4.5% previously. 
  • Fixed Asset Investment came in at a lower 2.9% than the 3.1% forecast (YoY YTD in October) and the 3.1% previous.
  • The strong Chinese data, coupled with lower inflation data from the US, UK and several European countries, lessened global growth fears and led to a surge in risk appetite, with stock indices across the globe seeing marked rallies. 
  • New Zealand is a major exporter of dairy products to China, so the positive newsflow helped support the prospects for the economy and demand for the New Zealand Dollar.
  • The US Dollar has fallen after inflation data suggested a greater chance of no further increases to interest rates. This makes the US a less attractive place for global investors to park their capital, reducing demand for the USD. 

New Zealand Dollar technical analysis: NZD/USD continues rallying

NZD/USD – the number of US Dollars one New Zealand Dollar can buy – extends its rally above the important November 3 high at 0.6001 and sets its sights on the 0.6055 October high. 

New Zealand Dollar vs US Dollar: Daily Chart

The break above 0.6001 confirms the short-term bullish bias again, with the next target at 0.6055.  

The pair has now broken cleanly above the 100-day Simple Moving Average (SMA) and a further push above the 0.6055 October high would change the outlook in the medium term, indicating the possibility of the birth of a new uptrend. Such a move would then target the 200-day SMA at around 0.6100.

As things stand, the medium and long-term trends are both still bearish, however, suggesting the potential for more downside remains strong.

 

Interest rates FAQs

Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%.
If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.

Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.

Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank.
If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.

The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure.
Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.

Source: https://www.fxstreet.com/news/new-zealand-dollar-rallies-on-positive-china-data-202311151222