Forex: NZD/USD at 13-day low after Fed’s taper and NZ GDP growth

on Dec 19, 2013
Updated: Oct 21, 2019
Listen Thursday, December 19th:_ The US Federal Reserve yesterday concluded its last monetary policy meeting for this year, and announced that the $85 billion worth of bond purchases per month will be cut by $10 billion from January 2014. The Federal Open Market Committee (FOMC) will reduce agency mortgage-backed securities purchases from $40 billion to $35 billion per month, and also the buying of longer-term treasury securities from $45 billion to $40 billion per month. The FOMC said that it saw the US economy as strong enough for the trimming to start.

Fed chairman Ben Bernanke said that “the recovery clearly remains far from complete”. He also observed: “we’re hopeful … we’ll begin to see the whites of the eyes of the end of the recovery, and the beginning of the more normal period of economic growth”.
The central bank also left unchanged the federal funds rate at the range from zero to 0.25 percent and said that it is likely to keep it there for an extended period of time.

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Bob Doll, a chief equity strategist Nuveen Asset Management thinks that “there’s a general consensus that … what the Fed is finally signalling is that the economy is doing better. In 2014, the economy will be a bit stronger and a bit better”.
Late yesterday Statistics New Zealand (SNZ) reported that rebounding dairy production drove a 1.4 percent growth in the nation’s Gross Domestic Product (GDP) in the quarter to September 2013, which is the largest quarterly rise since December 2009. Analysts’ expectations were for a 1.1 percent increase.

SNZ said also that the strong increase in dairy production was the main culprit for a 17 percent rise in agriculture, which represents about five percent of the country’s economy.
Westpac comments that “the drought and the subsequent recovery has left an uneven GDP growth profile over the course of this year, but today’s figures reinforce that the New Zealand economy is firmly in the grip of a widespread upturn”. Westpac also says that from their “perspective, the economy is behaving closely in line with our long-held forecast”, and that they “continue to expect a bulge of GDP growth over 2013 – 2015, associated mainly with post-earthquake rebuilding activity and robust construction elsewhere in New Zealand”.

The GDP figure was higher than the RBNZ’s forecasts, on which Westpac commented that “therefore this data will make the central bank feel more inclined to hike the official cash rate. We continue to regard March 2014 as the most likely date for the first OCR hike”.

Around the release of all these data the NZD/USD was driven by high volatility, which pushed the price back and forth within the 100-pip range from 0.8288 to 0.8188. At the end of the day the price lost 0.69 percent closing at 0.8205.
Earlier today the pair fell to an intraday low of 0.8177 reaching its lowest point since 6 December. At press time the pair is trading at 0.8191.
In the United States today Unemployment Insurance Initial Claims for the last week are due out at 13.30 UTC and are expected to show a number of 334,000.
Existing Home Sales for November and the Philadelphia Fed Manufacturing Index for this month are due out at 15.00 UTC.
Resistances today: 0.8255, 0.8275 and 0.8300.
Supports today: 0.8135, 0.8115 and 0.8100.
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