New Zealand’s economy is in freefall, with a deep recession and dire GDP data sparking bets on aggressive RBNZ rate cuts. Add a hawkish Fed twist, and NZD/USD has plunged to two-year lows. Could .5515 be the next stop?
By :David Scutt, Market Analyst
New Zealand is not only in recession but a deep one, increasing the risk of further large-scale interest rate cuts from the Reserve Bank of New Zealand. Combined with the Fed’s hawkish rate cut delivered earlier in the session, the news has seen NZD/USD suffer its largest one-day decline since May 2023, leaving it at more than two-year lows.
There is no other way to describe New Zealand’s Q3 GDP report than ugly. The economy contracted 1% following a 1.1% drop in Q2 that was originally reported as -0.2%. Markets were looking for a smaller contraction of 0.2%, the same level forecast by the RBNZ less than a month ago. Oops!
Rather than the economy contracting 0.4% over the year, it was more than three times larger at 1.5%. That’s not only a recession but a deep one, especially when you consider New Zealand’s rapid population growth.
GDP per capita fell 1.2% in Q3. It was the eighth consecutive quarterly fall in the series. Real gross national disposable income, a measure of living standards, declined 0.8% from three months earlier. That’s not great news.
Click the website link below to get our Guide to central banks and interest rates in Q4 2024.
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See the expectations for the Fed, ECB, and BOJ...and more importantly, what could drive monetary policy in Q4 and beyond!
The horror show has seen traders strengthen their conviction that the RBNZ will follow up the 50bps rate cuts delivered in October and November with another in February, putting the implied probability at around 91%. A total of 100bps of cuts are priced for 2025. Before today’s data that looked reasonable, but the risk now is the RBNZ will deliver more.
Source: Bloomberg
Already under pressure thanks to the Federal Reserve’s hawkish rate cut as the FOMC removed 50bps of easing from its 2025 forecast, the GDP report saw NZD/USD sink like a stone.
It declined more than 2% on Thursday, logging the largest percentage decline since May 2023. It now trades at levels last seen in October 2022. The Kiwi, a flightless bird, is well and truly grounded.
Source: TradingView
As flagged earlier this week, the break of wedge support has seen NZD/USD losses accelerate, bringing a potential retest of.5600 on the radar. If that minor level were to buckle, we’re talking about a possible return to .5515, the lows struck in October 2022. On the topside, resistance may be encountered at .5754, even if the price is unlikely to return their near-term.
RSI (14) and MACD are generating bearish signals on momentum, although the former is very oversold on the daily timeframe, increasing the risk of a sudden squeeze. Traders should look for obvious bottoming signals on shorter timeframes to determine when one may occur, but the prevailing bias remains to sell rips near-term.
– Written by David Scutt
Follow David on Twitter @scutty
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New Zealand’s economy is in freefall, with a deep recession and dire GDP data sparking bets on aggressive RBNZ rate cuts. Add a hawkish Fed twist, and NZD/USD has plunged to two-year lows. Could .5515 be the next stop?
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.
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By :David Scutt, Market Analyst
- New Zealand’s economy contracts 1% in Q3, following a revised 1.1% drop in Q2
- Markets price a 91% chance of another 50bps RBNZ rate cut in February
- NZD/USD plunges over 2%, marking its largest drop since May 2023
- Kiwi trades near .5600, with potential to revisit October 2022 lows at .5515
Summary
New Zealand is not only in recession but a deep one, increasing the risk of further large-scale interest rate cuts from the Reserve Bank of New Zealand. Combined with the Fed’s hawkish rate cut delivered earlier in the session, the news has seen NZD/USD suffer its largest one-day decline since May 2023, leaving it at more than two-year lows.
Kiwi economy going down the gurgler
There is no other way to describe New Zealand’s Q3 GDP report than ugly. The economy contracted 1% following a 1.1% drop in Q2 that was originally reported as -0.2%. Markets were looking for a smaller contraction of 0.2%, the same level forecast by the RBNZ less than a month ago. Oops!
Rather than the economy contracting 0.4% over the year, it was more than three times larger at 1.5%. That’s not only a recession but a deep one, especially when you consider New Zealand’s rapid population growth.
GDP per capita fell 1.2% in Q3. It was the eighth consecutive quarterly fall in the series. Real gross national disposable income, a measure of living standards, declined 0.8% from three months earlier. That’s not great news.
Click the website link below to get our Guide to central banks and interest rates in Q4 2024.
Central Banks Q4 2024 Market Outlook - FOREX.com US
See the expectations for the Fed, ECB, and BOJ...and more importantly, what could drive monetary policy in Q4 and beyond!
RBNZ pressured to slash rates further
The horror show has seen traders strengthen their conviction that the RBNZ will follow up the 50bps rate cuts delivered in October and November with another in February, putting the implied probability at around 91%. A total of 100bps of cuts are priced for 2025. Before today’s data that looked reasonable, but the risk now is the RBNZ will deliver more.
Source: Bloomberg
Already under pressure thanks to the Federal Reserve’s hawkish rate cut as the FOMC removed 50bps of easing from its 2025 forecast, the GDP report saw NZD/USD sink like a stone.
It declined more than 2% on Thursday, logging the largest percentage decline since May 2023. It now trades at levels last seen in October 2022. The Kiwi, a flightless bird, is well and truly grounded.
NZD/USD belted, bruised and no sign of a bounce
Source: TradingView
As flagged earlier this week, the break of wedge support has seen NZD/USD losses accelerate, bringing a potential retest of.5600 on the radar. If that minor level were to buckle, we’re talking about a possible return to .5515, the lows struck in October 2022. On the topside, resistance may be encountered at .5754, even if the price is unlikely to return their near-term.
RSI (14) and MACD are generating bearish signals on momentum, although the former is very oversold on the daily timeframe, increasing the risk of a sudden squeeze. Traders should look for obvious bottoming signals on shorter timeframes to determine when one may occur, but the prevailing bias remains to sell rips near-term.
– Written by David Scutt
Follow David on Twitter @scutty
NZD/USD: Kiwi Craters as Deep Recession Fuels RBNZ Rate Cut Bets
New Zealand’s economy is in freefall, with a deep recession and dire GDP data sparking bets on aggressive RBNZ rate cuts. Add a hawkish Fed twist, and NZD/USD has plunged to two-year lows. Could .5515 be the next stop?
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.
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