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19/06/24
198
NZD Flat Ahead of GDP For First Quarter
On Tuesday, the New Zealand dollar was flat and NZD/USD traded at about 0.6138, down 0.10% for the day in the European session. New Zealand is set to release the GDP report for the first quarter on Thursday.
It is not certain what news Tuesday’s GDP report will bring. Markets are anticipating that the New Zealand economy will have been flat in Q1. The major banks in New Zealand are divided, and some forecast a 0.1% gain while others project a 0.1% decline.
It is however certain that the economy is in the doldrums, after contracting in 4 of the last 5 quarters, including the last 2 quarters. Another drop in GDP for Q1 would mean the technical recession would continue.
A GDP of 0 or close to it indicates a weak economy for the RBNZ, which will support a rate cut soon. The RBNZ has however been hawkish and insists that it will not cut rates before inflation is under control.
Policymakers say they are willing to cut rates if inflation is within the target range of between 1% and 3%, even if it is higher than the midpoint. The inflation rate is currently at 4.0% and that’s too high for the central bank to begin trimming rates.
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