Slump in New Zealand Business Confidence Bolsters AUD/NZD
The Australian Dollar New Zealand Dollar (AUD/NZD) exchange rate ticked higher on Tuesday as the ‘Kiwi’ was pressured by the latest domestic business confidence figures.
At the time of writing AUD/NZD is up 0.32%, trading close to week’s opening levels after the pairing dipped on Monday.
New Zealand Dollar (NZD) Tumbles as Business Confidence Slumps
The New Zealand Dollar was forced to retreat during Tuesday’s trading session as domestic firms turned pessimistic in their economic outlook for the first time in over two years.
According to data published by the New Zealand Institute of Economic Research (NZIER), business confidence plummeted from 5% to -12% in the fourth quarter, falling well below forecasts of a more modest dip to 2%.
The decline appears to have been mainly driven by concerns over Jacinda Ardern’s new Labour government, with uncertainty over how her party’s policies may impact the economy prompting a gloomier outlook from firms.
NZIER principal economist Christina Leung said;
‘It appears uncertainty over the new government policies have made businesses even more downbeat. Businesses may be worried about the outlook for the New Zealand economy under the new Labour-led government.’
Australian Dollar (AUD) Strengthens as the US Dollar (USD) Continues to Slide
The Australian Dollar was easily able to take advantage of the weakness in the New Zealand Dollar on Tuesday as investors continue to flock to the ‘Aussie’ amidst a bout of US Dollar (USD) selling.
In fact AUD/USD climbed 0.72% on Monday and is currently close to breaking through the 80 cent marker.
USD has found itself under considerable pressure in 2018 as investors strike an increasingly dovish stance towards the currency.
The US Dollar came under even more pressure on Monday thanks to thin trading volumes in the US due to the Martin Luther King Jr Holiday.
AUD/NZD Forecast: Uptick in Dairy Prices to Bolster Kiwi?
Looking ahead the AUD/NZD exchange rate may slide early on Wednesday should prices rise for a second consecutive time at the latest global dairy auction.
However the New Zealand Dollar could just as easily retreat if prices continue to fall as they have in 5 of the 7 previous auctions.
Meanwhile Australia will publish its latest consumer confidence figures on Wednesday morning, with economists forecasting that household sentiment will have dipped again in January, although is expected to still remain in positive territory.