The New Zealand dollar edged higher on Thursday. NZD/USD was trading at 0.6855, up 0.24% on the day. The pair jumped 0.99% on Tuesday, buoyed by optimism over developments in China and Ukraine.
New Zealand GDP posted a strong 3.0% gain QoQ in the fourth quarter. This fell short of the consensus estimate of 3.2%, but nonetheless marked an impressive turnaround from the -3.6% slide in Q3. The data confirmed that the economy rebounded after COVID lockdowns hampered the economy in the third quarter.
The Chinese government has intervened after the meltdown in the country’s stock markets. Beijing announced it planned to boost the economy through monetary and loan policies which would spur growth. The announcement boosted Chinese stock markets on Wednesday, with the Hang Seng soaring 9.1%. The news also sent the New Zealand dollar soaring, as China is New Zealand’s biggest export market.
There was more positive news for the risk-sensitive New Zealand currency, as a peace plan in Ukraine appeared to have made significant progress. We saw reports of progress in the negotiations, only to be disappointed, and the fighting has not let up. Still, both Russian and Ukraine officials sounded more optimistic about a deal, which raised risk appetite.
Fed raises rates, revises dot plot
The Federal Reserve did not surprise anyone with its 0.25% hike, the first rise in rates since 2018. What was more of interest to the markets was the FOMC dot plot, which projected another six rate hikes this year.
The dot plot also forecasted that rates would rise to around 3% by the end of 2023, sharply higher than the 1.60% estimate in December. Fed Chair Powell said that a taper of the balance sheet could start as early as May. Together with the upcoming rate hikes, this showed that the Fed planned to be aggressive in its tightening.
NZD/USD Technical
- NZD/USD had support at 0.6764 and 0.6716
- There was resistance at 0.6893 and 0.6974