- The New Zealand dollar is crawling in the week, down 0.61%.
- US Fed pace tightening, recession fears, and sentiment were headwinds for the NZD/USD.
- US S&P Global PMIs begin to show that the economy is slowing at a faster pace than estimated.
The NZD/USD dives for the second consecutive day, though late in the session recovered some ground, and bounced off daily lows around 0.6247 amidst a risk-off impulse, as shown by global equities fluctuating between gains and losses. At the time of writing, the NZD/USD is trading at 0.6276.
NZD/USD traders must be aware that New Zealand will observe a holiday on Friday, so beware of thin liquidity conditions during Asia’s session. Meanwhile, the NZD/USD slid due to a buoyant greenback, which, illustrated by the US Dollar Index, gained 0.22%, at 104.405.
Recession fears and sentiment kept the NZD/USD heavy
Sentiment shifted sour on US recession fears. Fed’s Chief Jerome Powell testified at the US House of Representatives, matching Wednesday’s speech and answers, reiterating the Fed’s commitment to tackle inflation and, albeit challenging, expects to achieve a “soft landing.” Further, Fed speaking, in the name of Michelle Bowman, a member of the Board of Governors, backed a 75 bps for July and stated that inflation is unacceptably high, showing no signs of moderating.
In the meantime, Thursday’s US calendar featured Initial Jobless Claims for the last week (ending June 17), which rose by 229K more than the 227K estimated. Later, June’s S&P Global PMIs were revealed, with all three readings missing expectations.
Chris Williamson, Business Economist at S&P Global Market Intelligence, said, “Businesses have become much more concerned about the outlook as a result of the rising cost of living and drop in demand, as well as the increasingly aggressive interest rate path outlined by the Federal Reserve and the concomitant deterioration in broader financial conditions. Business confidence is now at a level which would typically herald an economic downturn, adding to the risk of recession.”
In the week ahead, the NZ economic docket is absent on holiday. In the US, the calendar will feature the Michigan Consumer Sentiment Final for June, alongside May’s New Home Sales.