NZD/USD pays a little heed to upbeat New Zealand Q2 GDP but stays above 0.6700

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  • NZD/USD keeps the post-Fed recovery despite shrugging off New Zealand (NZ) GDP data.
  • New Zealand’s second-quarter (Q2) GDP shrank 12.2% QoQ versus -12.8% forecast.
  • US Federal Reserve struck mildly hawkish tone despite showing readiness to pump the markets for longer.
  • Aussie employment data will be the key ahead of the next week’s RBNZ.

NZD/USD remains mildly positive while taking rounds to 0.6735 during the early Asian trading on Thursday. The pair recently ignored NZ Q2 GDP while staying on the path to consolidate the Fed-led losses. Also helping the pair could be the risk recovery ahead of the long day.

Will RBNZ be happy?

New Zealand’s Q2 GDP recovered from -13.3% YoY expectations to -12.4%. Additionally, prior readings were also revised up from -0.2% yearly and -1.6% QoQ to -0.1% and -1.4% respectively

Read: New Zealand GDP beats estimate, fall 12.2 percent in the second quarter

It should also be noted that New Zealand’s Current Account data also offered a positive surprise to the markets on Wednesday while rising beyond $0.595B forecast and $1,557B prior to $1,828B during the Q2.

On Wednesday, New Zealand Treasury came out with its pre-election Economic and Fiscal Update (PREFU) for this year. As per the updates, the policymakers see June quarter GDP at -16%, down from its previous forecast of -23.5% while the yearly GDP may improve from -4.6% budgeted figures to -3.1%. Further detail suggested that the 2021 GDP could come in at -0.5%.

The risk catalysts are also firming up as the US and China have recently avoided any major fights even as the World Trade Organization (WTO) termed the American sanctions on Beijing as unlawful. Though, this doesn’t limit US President Donald Trump to dislike WTO. It’s worth mentioning that the UK, China and the US are all flashing signs favoring a near-term solution to the coronavirus (COVID-19) while China’s plans of major investment also favor the commodity basket.

Considering the aforementioned positive catalysts relating to the NZ economy, the Reserve Bank of New Zealand (RBNZ) has the odds to defy market expectations of a dovish outcome. Even so, the Australia and New Zealand (ANZ) Banking Group said, The RBNZ’s “least regrets” strategy will not change. The Committee is likely to emphasize that preparations to deploy a negative OCR and Funding for Lending Programme are well underway; they could also flex tactical LSAP purchases to get more traction on the NZGB curve.”

Against this backdrop, S&P 500 Futures rise 0.13% despite downbeat prints of Wall Street benchmarks.

Looking forward, Australia’s August month employment numbers will offer immediate direction to the pair. Though, major attention will be given to the risk aspect as multiple data/events up for publishing can push traders towards risk-safety.

Technical analysis

A one-week-old ascending trend line, near 0.6720 now, keeps driving the quote upwards and challenge the monthly high surrounding 0.6790.

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