The New Zealand dollar weakened throughout the course of yesterday against its major currency pairings including the pound and US dollar, following from a report suggesting that New Zealand’s population growth is stalling.
As of 30th June, the population grew by 1.6% to 4.92 million, which was highlighted as the smallest annual increase seen since 2014. Previous improving data releases were also revised lower after the collection of important immigration data.
Slower population growth can usually have a knock on effect on consumer spending and the housing market, which both continue to weigh on the New Zealand economy. The Reserve Bank of New Zealand surprised the markets last week by cutting Interest Rates by 50 basis points to a record low of 1%, stating that inflation and employment levels would miss the central banks targets unless additional stimulus measures were implemented.
The New Zealand economy is also suffering due to lower than expected immigration levels. Estimates had suggested earlier this year that immigration levels were improving, however subsequent data has shown that the arrivals numbers had not been reached, and in fact continued to decline.
Another factor impacting the value of the New Zealand dollar is the ongoing trade war between the US and China, as China is New Zealand’s largest trade partner. To add to this, protests this week in Hong Kong which have escalated to “behaviour close to terrorism” according to Chinese officials, are also having a negative impact on the New Zealand dollar. Anti-government protests over a bill introduced in April which would allow people accused of crimes against China to be extradited have been ongoing peacefully for months, however all came to a head on Tuesday at Hong Kong Airport when these protests turned violent.
Overnight last night, Business NZ released its latest set of PMI (Performance of Manufacturing Index) figures which showed a contraction in manufacturing activity for the first time in 7 years in July. The index was released at 48.2, with the previous reading being 51.1, and anything below 50 is seen as contraction. The New Zealand dollar has weakened further this morning against a range of currencies including the pound.
Looking at the week ahead, on Tuesday the GDT (Global Dairy Trade) Price Index will be released, which can be a key mover for NZD exchange rates as this shows the change in prices for dairy products, which are New Zealand’s largest exported items. On Thursday, Retail Sales figures will be released for the second quarter of 2019, and any deviation from the previous quarters reading of 0.7% could cause movement for NZD exchange rates. You may wish to contact us if you have an upcoming requirement involving the New Zealand dollar.
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