After a quiet start to the week, the New Zealand dollar has dropped considerably in the Wednesday session. In North American trade, NZD/USD is trading at 0.6508, down 0.53% on the day. On the release front, there are no major data releases out of the U.S. or New Zealand. In the U.S., the Richmond Manufacturing Index improved to 5 points, shy of the estimate of 6 points. In New Zealand, ANZ Business Confidence improved to -32.0. Later in the day, the government releases the annual budget.
Reports that China has raised the ante in a bitter trade dispute have rocked global equity markets and hurt risk currencies such as the kiwi. Chinese media reported on Wednesday that China is threatening to curb the supply of rate metals to the U.S. These products are used in the production of items such as cell phones and electric cars, so any interruption in supply could hurt U.S. technology companies. With the trade war between the U.S. and China in full swing, it’s no surprise that the business sector is deeply pessimistic about economic conditions. China is a major trading partner, with some 25% of New Zealand exports going to the Asian giant. The ANZ Business Confidence survey remains mired deep in negative territory. Still, the indicator moved slightly higher in May, good enough for a 3-month high. Meanwhile, the semi-annual RBNZ Financial Stability Report stated that financial risks had not increased since the last report in November. The bank circled high consumer debt and New Zealand’s exposure to global developments as the main points of concern.
The U.S. consumer remains very optimistic about the economy, according to the latest CB consumer confidence index. The index jumped to 134.1 in May, up from 129.2 in the April release. This score easily beat the estimate of 130.1 and is close to 18-year highs. Retail sales were soft in April, but the sharp improvement in consumer confidence has raised hopes that retail sales data will improve in May.
The U.S. economy continues to perform well, and first-quarter economic growth is expected to remain above the 3% level. Preliminary GDP will be released on Thursday and is expected to post a healthy gain of 3.1%. In April, the initial release came in at 3.2%, easily beating the estimate of 2.2%. If the revised reading also beats expectations, traders can expect the greenback to move higher against its rivals.
