NZD/USD Jumps to 0.6150 as New Zealand Escapes Recession

NZD/USD strengthened to around 0.6145 in early Asian trading on Thursday. New Zealand’s first-quarter gross domestic product (GDP) was stronger than expected, coupled with a decline in the US dollar (USD), NZD/USD fluctuated higher. Investors are waiting for the US initial jobless claims, building permits, housing starts, the Philadelphia Fed manufacturing index and the speech of Fed Chairman Barkin to bring new impetus on Thursday.

New Zealand’s economic growth rate in the first quarter was 0.2% quarter-on-quarter, compared with 0% in the previous quarter. Data from Statistics New Zealand on Thursday showed that the figure was better than expected. The annual growth rate of gross domestic product (GDP) in the first quarter was 0.3%, compared with -0.2% in the previous period. The stronger GDP indicates that New Zealand has emerged from recession, which attracted some buying to go long on NZD/USD.

In addition, the New Zealand Westpac Consumer Confidence Survey showed that the consumer confidence index fell to 82.2 in the second quarter from 93.2 in the previous period.

On the other hand, last week’s weak US retail sales data stimulated the prospect of the Federal Reserve starting to cut interest rates within months, which put some selling pressure on the US dollar. The CME FedWatch tool shows that the market is currently pricing in a 67% chance of a 25 basis point (bps) rate cut by the Fed in September, up from 61% a day ago. On Tuesday, Boston Fed President Susan Collins said the Fed could cut rates once or twice later this year, but the central bank must remain patient amid volatile inflation indicators.

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