The New Zealand dollar has rebounded on Friday after a 1.4% slide over the past two days. NZD/USD is trading at 0.6017, up 0.70% in the European session at the time of writing.
Solid US numbers raises risk appetite
Exactly two weeks ago, a soft employment report out of the US panicked investors and caused a meltdown across global stock markets. The turmoil was brief as the stock markets have rallied. The fears that the US economy was hurtling towards a recession have eased this week, as US CPI was within expectations and US retail sales was much higher than the forecast.
US inflation dipped to 2.9% y/y in July, down a notch from 3% a month earlier which was also the market estimate. Retail sales jumped 1% m/m, bouncing back from -0.2% in June and breezing past the market estimate of 0.4%. As well, unemployment claims were lower than the market estimate for a second straight week.
The rout in the financial markets raised expectations for a half-point cut from the Fed to as high as 60%, but this has fallen to 30% since the retail sales report (a quarter-point has been priced in at 70%).
The volatility in the stock markets has been driven by the strength of the US numbers. This week’s positive data has not allayed investor fears completely and if upcoming key data is weaker than expected, we could see the financial markets react negatively.
The US dollar is showing weakness as the market turmoil has eased. Risk appetite has returned, which has given the New Zealand dollar a strong boost today.
NZD/USD Technical
- There is resistance at 0.6073 and 0.6146
- 0.5961 and 0.5888 are providing support
