New Zealand (NZD)
The release of Q4 GDP yesterday surprised to the upside showing an increase of 0.6% for the September quarter with a revised increase of 1% for the previous June quarter. The better than expected figure indicates that the New Zealand economy is larger and more productive than earlier figures suggested. On release of the data the New Zealand dollar (NZD) bounced off a dip below the 0.7000 against the USD rallying to around 0.7025 before dropping back to the 0.7000/10 level. Although the GDP data was well received it is against the background of a higher trade deficit and weaker prices at this week’s Global Dairy auction which continue to weigh on the NZD.
The Aussie economy continues to look to improve with US based Fitch Ratings commenting in its latest review that it expects the fiscal balance to come into surplus by 2021 after the public debt ratio peaks in 2018. However, it did flag Australia’s economic vulnerability to negative global economic developments and from any faster than expected rise in US interest rates. Also of note were comments from Australian Treasurer Morrison that Australia may need to cut corporate taxes now that they have been reduced in the US. Otherwise ongoing Australian economic growth now may be negatively effected.
United States (USD)
US equities were on a tear breaking a two day losing run as Congress passed the tax cut legislation, shrugging off a lower GDP figure at 3.2% (expected 3.3%). The GDP figure was trimmed on lower contributions from consumer spending and trade. However, official data showed the pace of expansion remained the fastest since early 2015. US home sales data was also positive coming in above expectations for November at 5.81mio, well in excess of the forecasted 5.52mio. The EUR/USD has struggled for clear direction. Now trading around 1.1845, the upside is favored but a break over 1.1900 is needed to confirm further gains. Immediate support is down at 1.1830 then 1.1800.
Little in the way of economic releases over the last few days. Later tonight will see the release of the final version of the GDP for Q3 which is expected to be unchanged at 0.4% with current account data and business investment for Q3 released as well. Currently the GBP/USD is around 1.3382. Immediate resistance is at 1.3390 but a break of 1.3420 is required to move into upward momentum. Support is at 1.3340 then 1.3300. We look for consolidation in the current region into next week.