High interest rates doing little good for New Zealand

This morning, we got data to show that New Zealand’s economy has slowed in the second quarter, cooling annual growth to the weakest in five years. GDP came in at 0.5% vs expectation of 0.6%, which is less than first quarter’s 0.8%. NZD/USD promptly fell by 80 pips in less than an hour. Will the record-high interest rates in NZ continue to curb and damage consumer and business spending? However, remember that yesterday we got better than expected NZ business confidence data which rose to a 5 month high. Nonetheless, I think the kiwi still has more room to fall in the near term at least. Next support zone…

is around 0.6500, then 0.6460. NZD/JPY’s nearest support around 76.40, then 76.00.

Japanese data also came in this morning, with Tokyo core Consumer Price Index (CPI) at +0.3% on year (was +0.2% in previous release), just as the market has expected. Comment on monetary policy was not available. The Bank of Japan (BOJ) has said to gradually raise interest rates, but did not give any timetable for rate hike. The market is still not ruling out another rate hike before year-end. This rebound data may give some support for the yen, after a five-day straight slide against the US dollar. Resistance zone between 118.00-118.30. Support around 117.30/40.

As mentioned in the previous blog posting, USD/CHF will be capped at 1.2500 before release of US PCE deflator at 1230 GMT, followed by U of Mich confidence at 1345 GMT. Fed’s Poole is also scheduled to speak on

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