Home Forex News NZD/USD Rallies Amidst Westpac Economic Recession Warning

NZD/USD Rallies Amidst Westpac Economic Recession Warning

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  • FED Corporate Bond Buying Scheme
  • NZ Economic Recession Concerns
  • FED Policy Impact

NZD/USD pair was up by more than 0.2% Tuesday morning, benefiting from weakness in the U.S. Dollar. The Greenback has come under pressure in the wake of the Federal Reserve announcing plans to buy corporate bonds to boost the economy’s liquidity levels.

NZ Dollar Resilience

The New Zeeland Dollar continued to edge higher even on Westpac, warning that economic confidence in the country is at low levels as the economy slips deep into recession. The pair has since bounced back from one-week lows as it continues to make a run for three-month highs.

The New Zealand dollar has remained resilient against the Greenback in recent weeks on the country being declared COVID-19 free. The country has gone for weeks without announcing any Coronavirus infections as well as death.

However, Westpac’s warning that COVID-19 has already done the damage continues to fuel weakness in the NZ dollar. The research firm warns that the pandemic stands to push the economy deep into recession, consumer confidence having plunged to low levels. Households are increasingly wounding back spending plans

Weak GDP, as well as an increase in unemployment level, are some of the developments that should continue to weigh in on the NZ strength against the Greenback. However, the NZ Dollar should continue to benefit from weakness in the Dollar.

Dollar Weakness

The Dollar has come under pressure in the wake of the Federal Reserve, confirming plans to boost liquidity levels in the U.S economy by purchasing corporate debt. The acquisition spree follows on a similar program that targets ETFs. The FED is to start buying individual corporate bonds under its Secondary Market Corporate Credit Facility.

The bond-buying spree helped boost sentiments in the equity market with the dollar weakening against other major currencies on easing risk sentiments in the market. The Dollar will yet again be in the spotlight as FED Chair testifies in front of the Senate committee later on Tuesday. The release of the US and retail sales data could also have an impact on the dollar strength and similarly influence trader’s sentiments on NZD/USD pair.

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