NZD/USD spikes to 20-month high ahead of RBNZ rates decision
- The NZD/USD price rose to a 20-month high as traders reacted to the latest New Zealand retail sales numbers.
- The data showed that electronic sales rose by an annual rate of 8.2% in October.
- These numbers came a day before the RBNZ interest rate decision.
The NZD/USD is up by 0.15% as traders react to the impressive retail sales numbers and the ongoing Reserve Bank of New Zealand (RBNZ) meeting. It is trading at 0.6830, which is a few pips below yesterday’s high of 0.6853.
New Zealand retail sales bounce back
In October, New Zealand moved to Covid alert level 1 as the number of new infections fell. That pushed most people in the country to shopping malls and restaurants. According to the statistics office, electronic sales rose by 8.8% in October from 5.4% in the previous month. That pushed the annualised rate of growth to 8.2%, which is the highest level since August this year.
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The cited the impressive spending in restaurants, cafes, and takeaways as the reason behind the rally. Spending in these companies rose by N$79 million in October, the highest increase in over 20 years. However, spending in hotels and motels declined by N$46 million because of the lack of international visitors. The bureau said:
“Auckland moved down to COVID-19 alert level 1 on 8 October, loosening previous restrictions on social gatherings. This meant more people could gather for events and celebrations again, after crowd limits were imposed in earlier months.”
Meanwhile, the virus has incentivised people to spend more on durables, which rose by N$244 million. That increase was driven by a N$138 million rise in furniture, electrical, and hardware retailing.
While most industries saw an uptick in retail sales, fuel and non-retail saw a decrease on October. The two dropped by N$65 million while non-retail dropped by $244 million.
RBNZ rate decision ahead
The New Zealand’s retail sales numbers came as the RBNZ officials started their monetary policy meeting. Analysts polled by Reuters predict that the bank will leave interest rates unchanged at 0.25% in this meeting.
They also predict that the bank will implement a funding program that could amount to half of the current quantitative easingprogram worth N$100 billion.
Most importantly, the bank’s governor could guide on negative rates. Indeed, analysts are predicting a 50 basis point cuts next year.
These measures are necessary to cushion the economy from the impact of the pandemic. This is because, while the country has managed to contain the disease, it is still facing challenges because of the large tourism industry.
NZD/USD technical outlook
On the weekly chart below, we see that the NZD/USD has been on a strong upward trend since March, when it dropped to a low of 0.5466. Today, the pair is trading close to the highest point since March 2019. It has also moved above the 50-day and 25-day exponential moving averages.
Most importantly, it has crossed the important 38.2% Fibonacci retracement level, which is a sign that bulls have prevailed. Therefore, the next target to watch is the 50% retracement at 0.7152. Read our comprehensive review of the best forex spread betting brokers here.