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Forex - NZD/USD weekly outlook: March 17 - 21

Published 03/16/2014, 10:30 AM
NZD/USD ends the week up 0.74% after RBNZ rate hike

Investing.com - The New Zealand ended the week close to an 11-month high against its U.S. counterpart on Friday, after the Reserve Bank of New Zealand raised interest rates and said it will end stimulus measures earlier than expected.

NZD/USD rose to 0.8604 on Thursday, the pair’s highest since April 12, before subsequently consolidating at 0.8534 by close of trade on Friday, down 0.09% for the day but still 0.74% higher for the week.

The pair is likely to find support at 0.8433, the low from March 12 and resistance at 0.8604, the high from March 13.

The RBNZ raised its benchmark interest rate to 2.75% from a record low 2.5% on Thursday, becoming the first developed nation to exit record-low borrowing costs.

Commenting on the decision, RBNZ Chairman Graham Wheeler said the bank expects to raise the key rate by about 2 percentage points over two years, with the pace depending on economic data.

The central bank also raised its growth forecast to 3.3% in the year ending March 31, faster than the 2.7% pace projected in December.

Meanwhile, investors continued to monitor events in Ukraine, where tension over moves by neighboring Russia in the Crimean region have heightened demand for safe haven assets.

Tensions between Russia and the West remained high ahead of Sunday's referendum in Ukraine’s Crimea region, now controlled by pro-Russian forces, on whether citizens want to join Russia.

The U.S. and Europe have said they would impose economic and diplomatic sanctions on Russia next week, if the vote takes place.

China’s faltering economy was also in focus after weak data raised fresh concerns over the strength of the world’s second-largest economy.

Fears over problems in China’s financial sector also sapped risk appetite following the country’s first domestic bond default this month.

China is New Zealand's second biggest export partner.

Data from the Commodities Futures Trading Commission released Friday showed that speculators increased their bullish bets on the New Zealand dollar in the week ending March 11.

Net longs totaled 14,449 contracts as of last week, up 7% from net longs of 13,432 contracts in the previous week.

In the week ahead, investors will be looking ahead to Wednesday’s monetary policy announcement by the Federal Reserve amid speculation the central bank is likely to continue to scale back its stimulus program.

The Fed is also to publish its economic forecasts and Fed Chair Janet Yellen will hold a press conference.

Fourth quarter GDP data from New Zealand will also be in focus.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets. The guide skips Friday as there are no relevant events on this day.

Monday, March 17

The U.S. is to publish data on manufacturing activity in the Empire State, as well as reports on industrial production and long term securities transactions.

Tuesday, March 18

The U.S. is to produce data on consumer inflation, in addition to reports on building permits and housing starts.

Wednesday, March 19

The Federal Reserve is to announce its federal funds rate and publish economic forecasts for inflation and growth. The Fed statement is to be followed by a press conference with Chair Janet Yellen.

Later Wednesday, New Zealand is to publish data on fourth quarter gross domestic product, the broadest indicator of economic activity and the leading indicator of economic growth.

Thursday, March 20

The U.S. is to publish the weekly report on initial jobless claims, as well as data on existing home sales and manufacturing activity in the Philadelphia region.

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