Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

The Kiwi Came into the Reckoning to Repeat the Loonie's Fate

By Sergey LysakovForexAug 04, 2021 12:56
uk.investing.com/analysis/the-kiwi-came-into-the-reckoning-to-repeat-the-loonies-fate-200490880
The Kiwi Came into the Reckoning to Repeat the Loonie's Fate
By Sergey Lysakov   |  Aug 04, 2021 12:56
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

The New Zealand Dollar, or just the Kiwi, according to the traders' slang term, could become the second of the major currencies to strengthen on a systematic basis after the Loonie, which is the Canadian Dollar. The last one has been embarking on a healthy path since the third week of April when the central bank of the country changed the size of the quantitative easing (QE) monetary program from $4 billion to $3 billion per week, thus partly compressing the growth pace of the excessive money supply.
 
The idea of printing less money for the needs of a recovering economy helped the Loonie to rise in price at that time by a total value of about 5% over the month of May. During the next six weeks, the USD/CAD dynamics did not have an unambiguous direction, and the Greenback managed to bounce almost to the previous technical levels, in line with moves in other currency pairs. But the comeback above 1.28 did not last long, and the quotes finally slipped to the 1.25 area by the beginning of August, probably confirming the medium-term trend reversal.
 
A similar case may take place now with the New Zealand currency, after the country's central bank clearly hinted on Tuesday, August 3, that it may soon begin consulting on different ideas of how to tighten mortgage lending standards in order to limit a potential bubble on the housing market and to protect the new home buyers. But this seemed to be only the first step. Today a remarkable drop in New Zealand's unemployment rate, from 4.7% a month ago to 4.0%, was recorded. This is exactly the pre-pandemic level, and the recovering situation raised the market's expectations that even the refinancing rate hike could begin within two weeks, at the nearest meeting of the Reserve Bank of New Zealand (RBNZ), or at least at its next meeting on October 6. Meanwhile, the labour cost index rose by as much as 2.2% year-on-year and by 0.9% quarter-on-quarter, as the employment level happened to grow by 1.0% compared with Q1 2021. The expert community expected just 0.6-0.7% in addition to the previous employment indications. 
 
The very smallest consequence may be just the speculative activity on the forex market in anticipation of the actual RBNZ moves after the leak that some analysts at Bank of New Zealand declared: "The heat we've been hearing and warning about regarding New Zealand's labour market has been borne out... this surely removes any doubt about the (central bank) soon removing its foot from the accelerator." The Kiwi now is about 100 points higher than it was quoted at last Friday's close. The NZD/USD pair overcame the 0.70 technical and psychological thresholds and was trading near 0.7075 before European midday.
 
It may fully follow up with an advantage to grow further, especially when the Australian Dollar is also rising against the Greenback on the wave of the Reserve Bank of Australia's message, which was sent yesterday to investors that the Australian financial regulator may decide if it will reduce the volume of bond repurchases in September, even despite indefinite prospects of new restrictive measures introduced in the country because of the renewed cases of COVID-19.
 
In one form or another, but the market may hope in both cases for some earlier attempts to tighten monetary policy both in Australia and now in New Zealand then it could be done by the Federal Reserve in the United States or doubly so for the case of the European Central Bank and the Euro. Interest rates in Australia and New Zealand have always been historically higher than in other countries, which makes it a suitable host for other reserve currencies. All of the previously mentioned may with a high probability, lead not only to an increase in both AUD/USD and NZD/USD above the 0.75 landmarks, but also to a gradual downward movement in the EUR/AUD and EUR/NZD pairs.

The Kiwi Came into the Reckoning to Repeat the Loonie's Fate
 

Related Articles

Marios Krausse
Traders Eye Inflation Reports By Marios Krausse - Sep 13, 2021

Welcome to a new trading week. Traders will likely be eyeing key inflation data from the U.S., U.K. and eurozone this week to shape expectations for monetary policy tightening. The...

The Kiwi Came into the Reckoning to Repeat the Loonie's Fate

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email