NZD Hit As Business Confidence Tanks Again, Govt Response Eyed

ANZ BUSINESS CONFIDENCE, NEW ZEALAND DOLLAR TALKING POINTS:

• ANZ’s confidence survey hit a new ten-year low in August
• It has been in freefall since late 2017
• NZD/USD took a hit, just as it was threatening the year’s long downtrend

The New Zealand Dollar fell sharply Thursday as a survey of long-ailing business confidence hit new, ten-year lows.

August’s indicator from the Australia and New Zealand Banking Group (ANZ) has been in the doldrums since September 2017. It fell to -50.3 in August, the lender said, from a gloomy enough -44.9 in July. Fears that this malaise is become entrenched, and that it will weigh heavily on business investment, this week prompted the New Zealand Government to initiate a standing business advisory council to try and help lift spirits.

The latest survey shows just how much work it has to do.

The precise reasons for NZ Inc.’s utter misery can be quite hard to pin down. Fears of trade conflict and a slowing Chinese economy all play their part and, sadly for Wellington, don’t seem especially susceptible to domestic cures. Cutting regulation –and especially employment regulation- would also probably help, but the newish coalition government does not seem especially inclined that way. At least not yet.

NZD/USD took the survey pretty badly, falling below the 0.67 handle in short order and staying down.

The broader, daily NZD/USD chart remains dominated by the long downtrend in place for much of this year. Steady interest rate increases in the United States have eroded the New Zealand Dollar’s long held yield advantage, while the domestic Official Cash Rate is seen remaining at its 1.75% record low until at least the fall of 2019.

Still, the current uptick in market risk appetite has enabled the pair to challenge the downside channel top seriously for the first times since late July. However, the kiwi remains to a large extent hostage to that appetite, and the next gloomy trade headline could be enough to send it lower once again.

It remains to be seen whether the ANZ survey was bad enough to see it back within the channel on a daily close. Watch out for that later Thursday. It could be key to near-term direction.

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