Forex News: NZ Dollar Falls As Weak GDP Spurs RBNZ

NZ Dollar Falls As Weak GDP Spurs RBNZ Rate Cut

(RTTNews) - The New Zealand dollar weakened against other major currencies in the European session on Thursday, as traders speculate more interest rate cuts by the Reserve Bank of New Zealand (RBNZ) in the wake of the weaker-than-expected GDP data for the second quarter.

Data from Statistics New Zealand showed that the economy contracted more than anticipated in the second quarter. GDP fell 0.9 percent on a quarterly basis, which was less than the 0.3 percent fall that was anticipated and essentially reversed the 0.9 percent growth that occurred in the previous quarter.

GDP decreased 0.6 percent year over year, falling short of forecasts that growth would stay constant.

Asian stocks traded lower following a slightly hawkish leaning policy decision from the Federal Reserve.

Investors reacted to hawkish comments from Fed Chair Powell, who said higher goods prices are feeding through to inflation and that the FOMC expects inflation to continue to build into next year.

The latest projections from Fed officials also suggest they expect the central bank to lower rates two more times this year.

Traders may have been disappointed that Fed officials don't appear eager to cut interest aggressively, with only newly sworn in Fed Governor Stephen Miran preferring to lower rates by half a point at the meeting.

The central bank's next monetary policy meeting is scheduled for October 28-29, with CME Group's FedWatch tool currently indicating an 89.1 percent chance the Fed will lower rates by another quarter point.

In the European trading today, the NZ dollar declined to more than a 15-year low of 2.0054 against the euro and a 3-year low of 1.1256 against the Australian dollar, from early highs of 1.9915 and 1.1204, respectively. If the kiwi extends its downtrend, it is likely to find support around 2.02 against the euro and 1.13 against the aussie.

Against the U.S. dollar and the yen, the kiwi dropped to a 10-day low of 0.5894 and nearly a 2-week low of 86.88 from early highs of 0.5936 and 87.21, respectively. The kiwi may test support near 0.57 against the greenback and 85.00 against the yen.

Looking ahead, U.S. weekly jobless claims data, U.S. Philly Fed business conditions for September and U.S. Consumer Board's leading index for August are slated for release in the New York session.

At 7:00 am ET, the Bank of England (BoE) will announce its monetary policy decision. The BoE is widely expected to hold its benchmark bank rate at 4.00 percent after a quarter-point reduction in August.

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