The New Zealand dollar has posted gains on Monday, ending a three-day skid. In the North American session, NZD/USD is trading at 0.5856, up 0.35% on the day. On Friday, the New Zealand dollar dropped as low as 0.5816, its lowest level since last November.
New Zealand retail sales sink in Q3
New Zealand consumers aren't spending, which is bad news for the economy. Retail sales in the third quarter declined by 2.5% y/y after a 3.6% decline in Q2. On a quarterly basis, retail sales fell 0.1% in the third quarter, following a 1.2% decline in Q2. The numbers reflect weak consumer spending despite rate cuts by the Reserve Bank of New Zealand.
The central bank joined the rate-cutting cycle in August and chopped rates by 50 basis points last month, bringing the cash rate to 4.75%. Still, consumers are pessimistic about the economic outlook and have cut back on discretionary spending. The RBNZ meets on Nov. 27 and is expected to deliver another 50-bp cut. The struggling New Zealand dollar fell almost 1% after the October cut and we could see another sharp decline if the central bank repeats with a 50-bp cut this week.
The New Zealand economy declined by 0.2% in the second quarter and likely declined in the third quarter, which would indicate a recession. The RBNZ has succeeded in bringing inflation, which eased to 2.2% in the second quarter, the first time in 3.5 years that inflation is within the target band of 1 to 3 percent. If inflation remains low, the central bank will be able to continue cutting rates in an attempt to boost growth.
NZD/USD Technical
- NZD/USD tested support at 0.5837 earlier. Below, there is support at 0.5813
- There is resistance at 0.5857 and 0.5881
