- ANZ’s New Zealand business confidence indicator came in weaker-than-expected, strengthening the offered tone around the NZD.
- NZD/USD hit 20-day low a few minutes ago and could suffer a deeper drop on dovish RBNZ expectations.
The NZD/USD fell to 0.6780, the lowest level since Feb. 8, soon before press time as the widely-followed business confidence indicator fell more-than-expected, validating the New Zealand central bank’s dovish shift on interest rates.
New Zealand’s business confidence fell to -38 in March, according to Australia New Zealand Bank (ANZ), contradicting the market expectation of a slight improvement to -24.3 from the February’s print of -30.9. The ANZ’s activity outlook also came in weaker-than-expected at 6.3 percent.
The dismal confidence number comes a day after the Reserve Bank of New Zealand surprised markets by static that the next rate move could be to the downside. One of the reasons why the central bank moved away from its neutral bias is the recent deterioration in economic conditions and business confidence.
The data released today will likely boost expectations of an early RBNZ rate cut. As of yesterday, swaps were pricing a 71 percent chance of a rate cut in August.
Add to that the weakness in CNY and the risk-off tone in equities, and the path of least resistance for the NZD appears to be on the downside.
As of writing, NZD/USD is trading at 0.6792, representing a 0.10 percent drop on the day.
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