- NZD / USD testing the neighborhood of the 0.60 figure, but dollar too strong.
- The divergence between the Fed and the RBNZ is at stake.
The NZD / USD was challenged mid-week following a double blow from the Reserve Bank of New Zealand and the Federal Reserve. As of this writing, the bird is trying to retrieve the handle of 0.60. However, the US dollar is probably too strong for him in the current ecosystem of the geopolitical, financial and commodity markets.
The NZD / USD was down, for the most part, trading at 0.5997, currently falling from a high of 0.6098 to a low of 0.5997. Yesterday, the RBNZ extended QE to $ 60 billion as planned and today, Adrian Orr indicated that QE remains the tool of choice as opposed to negative rates. However, negative rates remain an option that fixes the divergence between the Fed and the RBNZ, favoring the decline of the NZD / USD.
Powell reiterated that negative rates are not something the Fed is looking for
At the start of the American session, Fed President Jerome Powell spoke about the American economy at an event hosted by the Peterson Institute for International Economics. Powell’s comments fueled a spike in the American dollar Wednesday, further adding to the bearish case for NZD / USD. Powell explained that the FOMC’s view on negative rates has not changed and reiterated that this is not something the Fed is considering.
“The Fed intends to continue using the tools he has already tried, “said Powell in response to questions at an event hosted by the Peterson Institute for International Economics.
The previous minutes on the negative rate debate indicate that all FOMC participants were against them
In the meantime, for today, we will have the budget that will reveal the outlook for government books and the issuance of bonds. “This is not going to be pretty, with growing deficits and an increase in debt. We predict that the basic net debt of the Crown will reach 40 to 50% of GDP. $ 45 billion of this amount over the fiscal year 2020/21. Total issuance is expected to be $ 100 billion higher than previously reported, “analysts at ANZ Bank said.