- New Zealand economy expanded more than expected in the second quarter.
- US Dollar Index erased FOMC-inspired gains, drops toward 98.30.
- Low-tier data from the US came in better than expectations.
The NZD/USD pair lost more than 40 pips on Wednesday as the USD gathered strength following the Federal Open Market Committee’s (FOMC) neutral tone in its monetary policy statement. After testing the 0.63 handle, however, the pair staged a modest rebound that was fueled by the upbeat growth data from New Zealand. Nevertheless, the pair struggled to preserve its momentum in the second half of the day and was last seen trading at 0.6313, losing 0.1% on a daily basis.
NZ economy shows signs of life
The data published by Statistics New Zealand revealed that the real gross domestic product (GDP) in the second quarter expanded by 0.5% on a quarterly basis to beat the market expectation of 0.4%. The annual growth rate came in at 2.1% compared to analysts’ estimate of 2.
On the other hand, the US Dollar Index (DXY), which rose to 98.66 on Thursday after the FOMC announced 25 basis points cut to its policy rate, lost its traction today as investors try to figure out whether the Federal Reserve cuts the policy rate again in the remainder of the year.
Commenting on the FOMC decision and Chairman Powell’s remarks, “Crucially, the Fed still did not want to pre-commit to more easing,” Danske Bank analysts noted.
“As a guide to future Fed decisions, Powell hinted to monitor (1) political/trade uncertainty, (2) global data and (3) US inflation. Thus the outcome of trade negotiations in early October will be key for the Fed’s next decision. We continue to expect a cut at each of the next four Fed meetings, which are not fully priced by the market that looks for around three more into 2020.”
The only data from the US today showed that the business activity in the manufacturing sector in the Philadelpiha area expanded at a slightly higher rate than expected in September and the initial jobless claims came in at 208,000 for the week ending September 6 to better the market forecast of 213,000. These data helped the DXY pull away from its lows and the index was last down 0.25% on the day at 98.30.
Technical levels to watch for
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