The New Zealand dollar continues to lose ground. During the European session, the NZD / USD traded at 0.6715, down 0.39% on the day. The currency ended last week on a sour note, down 0.89%.
Pessimistic New Zealand consumers
There is a lack of joie de vivre among New Zealanders, according to the Westpac Consumer Sentiment Index for the fourth quarter. The index slowed for a second consecutive quarter, falling to 99.1 from 102.7 previously. The drop is significant as confidence has fallen below the 100 level, indicating that more people are pessimistic than optimistic about the economy. Westpac noted that households were worried about the economy, rising interest rates and the latest variant of Covid, Omicron. The lockdowns have also shaken consumer confidence, as consumer prices have risen rapidly and reduced the purchasing power of consumers.
New Zealand’s economy contracted in the third quarter by 3.7%. The steep decline did not cause the kiwi to fall, as investors may have been relieved that the release was not as gloomy as the RBNZ projection of a -7% drop. Recent economic indicators have been strong, such as data on employment and consumer spending. Even with negative growth in the fourth quarter, the rating agency Fitch forecast the economy to grow 5.3% this year. However, Fitch expects growth to slow to 3.8% in 2022, in part due to tighter monetary policy. The RBNZ has embarked on a series of rate hikes set to extend through 2022, but the bank will need to lead the economy and ensure that higher rates do not stifle economic growth.
New Zealand continues to run trade deficits. In November, the trade balance stood at -864 million NZD. Still, it was better than expected and a lower deficit than the October reading of -1302 million.
Technical NZD / USD
There is resistance at 0.6813. Just above is resistance at 0.6889.
NZD / USD has weak support at 0.6681. Below that there is support at 0.6625.