- New Zealand Economic recession
- RBNZ Policy Report Expectation
- Coronavirus fears impact
NZD/USD pair bounced-back, Monday morning, after initially plunging to three-week lows amidst growing concerns about the New Zeeland Economy. The economy is already in recession after GDP contracted by 1.6% in the March quarter. Likewise, NZ dollar remains on the defensive ahead of a key policy meeting report by the Reserve Bank of New Zealand on Wednesday.
NZ Dollar Weakness
The NZD/USD is down by more than 2.3% from its three-month highs amidst weakness in the NZD. While the country has gone for weeks without reporting coronavirus infections, the pandemic impact is already being felt fuelling weakness in the NZ dollar.
Economist expects RBNZ to retain interest rate at the current 0.25% mark. However, there is talk that the central bank could be forced to cut rates into negative territory should things fail to improve.
The Central bank may also have to raise the $38.5 billion cap on its quantitative easing to allow for more stimuli to support the struggling economy. Economists have already raised concerns that the economy could contract by a further 17% in the three months through June as the Island Nation continues to struggle with its biggest contraction since the 2009 financial crisis.
In the week ahead, how the greenback responds to developments around the globe should influence NZD/USD pair price action, in addition to the RBNZ policy statement. The greenback is seen strengthening early in the week, touching three-week highs on concerns about the second wave of coronavirus infections.
A strengthened dollar should pile more pressure on the NZD/USD, which is struggling for direction at one-week lows. On Monday, traders wait for the United States Existing Home Sale, which paints a picture of how the U.S economy is fairing amidst the COVID-19 pandemic.