In recent times New Zealand Dollar Analysis: NZD/USD Weakens on Bolder Basket Risk Aversion. This report explains that although the New Zealand economy has been recovering recently, there is still plenty of upside for investors looking to buy into a stronger economy. The recent interest rate cut by the Reserve Bank of New Zealand (RBNZ) is expected to do more to support consumer spending and consumer-driven economic growth. As a result, the New Zealand Dollar Index (NZD) has strengthened over recent weeks and is now looking stronger than many other major currency pairs. If you are planning to trade the NZD, its important that you understand that you are going to be trading against a much more expansive and volatile markets. The following article will take a look at this information regarding the weak link between the New Zealand Dollar (NZD) and equity markets.
One of the first things I would like to discuss in this New Zealand Dollar Analysis: NZD/USD weakness is found when comparing it to the American Stock Index (ASX). When you compare the ASX to the New Zealand dollar, you find that the ASX is quite weak, with oversold conditions. Bond markets in New Zealand have also been very sensitive recently, with many companies (such as Glencore, Energybank and Enquiry) having had trouble raising new business and losing market share. Many experts believe that there are some significant future issues with the New Zealand bond market and the weakness of the NZD.
From a technical perspective, another thing that jumps out is the fact that the New Zealand dollar has been strengthening against many major currencies, most notably the Euro and the UK’s pound. However, from a broad perspective, one of the major indicators of strength seen in the New Zealand bond market is the relative strength of the dollar. There are many technical reasons for this, which I will detail further in this report, but suffice to say that when the New Zealand government began raising the NZD to strengthen the economy, the currency strengthened against most major currencies. The combination of strong economic data and low inflation, plus the positive outlook for the New Zealand economy, and the strong New Zealand dollar all work together to support the strength of the New Zealand dollar.
With all of this said, what does this mean for investors who are considering investing in the New Zealand economy? First and foremost, this means that you should now be able to find good quality bond products in the New Zealand market, in spite of the recent weakness in the bond market. In addition, there is now a lot more economic data available for you to analyze from an investor perspective, including unemployment figures, consumer spending and inflation data. As I mentioned in my last blog, the combination of solid economic data and low inflation has meant that bond prices across the board have dropped over the past year or so, leaving many New Zealanders is struggling to make even their necessary monthly minimum payments.
Despite the recent weakness in the New Zealand dollar, this doesn’t necessarily translate into bad news for those who have long been trading in the country’s national debt markets. For one thing, it means that interest rates are still relatively low compared to other parts of the developed world, meaning that you can potentially earn quite a bit of money if you know how to do it right. If you have access to the right research, you can easily turn a fairly minor loss into a substantial profit, especially if you take advantage of good, reliable technical analysis to identify good times to buy, as well as to sell during these times. If you aren’t that interested in the technical side, don’t worry – you can still find plenty of interesting, actionable information about New Zealand and its economy through our free online investment research tool, which gives you the ability to quickly and easily identify what to do next.
There is also some good news on the domestic front in New Zealand, despite recent financial issues. While unemployment numbers remain high, at around 7%, household income has actually picked up in the past year, with salary increases hitting both the upper and lower ends of the market. If you are worried about the housing market, you needn’t be: overall home sales have picked up in recent months, and house prices are on the incline. As these numbers demonstrate, something in New Zealand’s domestic economy is working out well.
The last part of this NZD Analysis: What to do if the economy isn’t as strong as hoped. Some analysts have suggested that New Zealand’s relatively low growth rate (the lowest in the developed world) could dampen business activity over the next few quarters, but as long as the government continues to provide stable support, we should expect growth in the economy over the coming years. The key to doing this is having access to cheap international money, which New Zealand has enjoyed for some time, espe