New Zealand dollar rises to five-week high, retail sales next

The New Zealand dollar continues to gain ground and has extended its gains for a seventh straight day. In the North American session, NZD/USD is trading at 0.6187, up 0.12%. The New Zealand dollar last had a losing daily session on February 13 and has jumped 2.1% since then.

New Zealand consumer spending has been weak and more bad news is expected on Friday, when retail sales for the fourth quarter will be released. Retail sales slipped 3.4% y/y in Q3 and the markets are bracing for another sharp decline of 3.6%. On a quarterly basis, retail sales haven’t shown a gain since Q3 of 2022 and the market estimate stands at 0.4%. The Reserve Bank of New Zealand will be keeping a close eye on the release, which is the last tier-1 event ahead of the policy meeting on February 28th.

Minutes: Fed not ready to lower rates

The minutes of the Fed’s January meeting didn’t contain any surprises. Fed members remained concerned about lowering interest rates too early and questioned “how long a restrictive monetary policy stance would need to be maintained”.  In other words, the “higher for longer” stance will remain in place for now. The most important consequence of this policy is that a March cut is off the table, with only a 5% likelihood, according to the CME’s FedWatch tool.

The Fed’s uneasiness about lowering rates too early was reiterated by Fed Governor Michelle Bowman on Wednesday. Bowman said that the current economic climate was not conducive to a rate cut. Bowman has been hawkish on inflation and said last month that she would consider raising rates if inflation stalled or reversed and moved higher.

NZD/USD Technical

• NZD/USD tested resistance at 0.6211 earlier. Above, there is resistance at 0.6270
• 0.6168 and 0.6109 are providing support