Robust New Zealand Service Activity Pressures AUD/NZD
The Australian Dollar New Zealand Dollar (AUD/NZD) exchange rate slid on Tuesday as New Zealand’s latest service PMI beat expectations.
At the time of writing AUD/NZD is down around 0.5%, with the pairing trading around half a cent lower.
New Zealand Dollar (NZD) Bolstered by Robust Services PMI
The New Zealand Dollar advanced against the Australian Dollar at the start of Tuesday’s session following the release of the latest domestic Service PMI.
According to data published by Business New Zealand (BNZ) the domestic service index fell from 56.5 to 56.0 in December, just beating expectations of a dip to 59.9.
While service activity slowed slightly last month, investors were relieved by the fairly resilient reading in the wake of the manufacturing figures last week, which saw the sister index plummet from 57.7 to 51.2 over the same period.
Craig Ebert, senior economist at the Bank of New Zealand said;
‘Above-average outcome was doubly significant, considering the Performance of Manufacturing Index decelerated sharply in December. Had the PSI done so too, we would have been much more concerned that the economy might be choking back a bit, following the election.’
Australian Dollar (AUD) Slides on Suggestions it is Overvalued
Extending the Australian Dollar’s losses against the ‘Kiwi’ on Tuesday and prompting it to fall against the majority of its peers were suggestions that the currency is looking ‘expensive’ again.
This comes as the ‘Aussie’ broke through the 80 cent marker with the US Dollar (USD) earlier in the session.
In a note to clients Westpac suggested that looking at the factors that have contributed to this rise it appears that the majority of the AUD/USD exchange rate’s recent gains have been driven by US Dollar weakness and not a strengthening of the fundamentals behind the Australian Dollar.
This lead to a bout of profit taking, which saw AUD/USD slump 0.5% and allowed the New Zealand Dollar to climb even higher.
AUD/NZD Forecast: ‘Kiwi’ to Slide Following NZ Inflation Figures?
Looking ahead the most impactful even on the AUD/NZD data calendar this week will likely be the release of New Zealand’s latest CPI figures.
The figures may see the New Zealand Dollar tumble on Thursday as economists forecast that they will show that domestic inflation ticked a little lower in the fourth quarter.
Meanwhile a lull in domestic data for the Australian Dollar may leave it a little directionless this week, with movement likely to be driven by commodity prices and the strength of the US Dollar.