- NZD/USD fell to near two-year lows, even as it pars some of its earlier losses.
- The Fed is expected to raise rates to the 4.4% mark, according to the FOMC’s summary of economic projections.
- The US S&P Global PMI is watching along with Fed Chairman Jerome Powell’s speech on Friday.
The New Zealand dollar fell to near two-year lows on Thursday amid growing concerns that a frenzy of central bank tightening is likely to push the global economy into recession. At the time of writing this article NZD/USD is trading at 0.5845, below its opening price by 0.11%
The US Federal Reserve decided to raise rates by 75 basis points on Wednesday, stressing that it is likely to continue its tightening cycle. The Summary of Economic Projections (SEP) showed that FOMC members expect the federal funds rate (FFR) to end around 4.4%.
NZD/USD pars earlier losses but remains on the defensive
During the press conference, Jerome Powell he said, “We need to get inflation behind us,” adding, “I wish there was a painless way to do it.” It’s not.” The SEP updated GDP, PCE, core PCE and unemployment projections. Most members expect GDP at 0.2%, while PCE and core PCE were revised upwards to 5.4% and 4.5% by the end of the year. Related with Unemployment ratepoliticians revised the figure to 3.8%.
Before Wall Street opened, the Labor Department showed U.S. jobless claims rose by 213,000 in the week ended Sept. 17, less than an estimate of 217,000 but above the previous figure, revised downward to 208,000.
Meanwhile, U.S. Treasury yields rose, led by the benchmark 10-year note, which rose 14 basis points to 3.714%, while the dollar fell, as shown by the U.S. dollar index.
Meanwhile, the New Zealand Economic Survey said consumer confidence improved in the third quarter from 78.7 to 87.6 in the previous quarter. Over the past week, ANZ Bank economists forecast three more rate hikes of 25 basis points by the RBNZ at the February, April and May monetary policy meetings. The bank therefore estimates that the Overnight Cash Rate (OCR) will end up around 4.75%.
“The economy is not turning around, the tight labor market and strong wage growth partially offset the impact of higher interest rates. The low New Zealand dollar is also a significant offset to current currency conditions,” ANZ Bank analysts said.
What to watch
New Zealand’s economic slate is blank, so traders are caught off guard by US economic data.
The US economic calendar will be published by S&P Global Manufacturing. Services and Composite Flash PMIs for September and Fed speakers led by Chairman Jerome Powell will switch between news reports.