The New Zealand edged higher against its U.S. counterpart on Friday, but gains were limited amid expectations that the Federal Reserve could make a small cut to its asset purchase program at its upcoming policy meeting.
The central bank is scheduled to meet December 17-18 to review the economy and assess monetary policy.
NZD/USD fell to 0.8178 on Thursday, the pair’s lowest since December 6, before subsequently consolidating at 0.8284 by close of trade on Friday, up 0.21% for the day but 0.2% lower for the week.
The pair is likely to find support at 0.8178, Thursday’s low and resistance at 0.8319, Thursday’s high.
Expectations for a small reduction in the pace of the Fed’s USD85 billion-a-month asset purchase program at its upcoming policy meeting were boosted after stronger-than-forecast U.S. retail sales data for November released on Thursday added to signs that the economic recovery is deepening.
An agreement on a two-year U.S. budget deal was also seen as removing an obstacle to the winding back of monetary stimulus.
The dollar came off highs as investors locked in profits, while data showing that U.S. producer price inflation fell 0.1% in November sparked concerns over the sluggish inflation outlook.
The soft inflation data did little to alter expectations that the Fed will begin withdrawing stimulus in the next few months after the latest U.S. nonfarm payrolls report showed that the U.S. economy added more jobs than expected in November.
Meanwhile, in New Zealand, the Reserve Bank of New Zealand left interest rates unchanged but suggested possible increases for next year.
In a widely expected move Wednesday, the RBNZ held its benchmark interest rate at 2.50% but said it will start raising interest rates in the first half of next year as the economy strengthens.
"The bank will increase the official cash rate as needed in order to keep future average inflation near the 2% target midpoint," RBNZ Governor Graeme Wheeler said.
In the week ahead, investors will be focusing on Wednesday’s outcome of the Fed’s monthly policy meeting, and a press conference with Chairman Ben Bernanke will be closely watched. Meanwhile, third quarter GDP data out of New Zealand will also be in focus.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.Monday, December 16
China is to produce preliminary data on the closely watched HSBC manufacturing index. The Asian nation is New Zealand’s second largest trade partner.
The U.S. is to release reports on industrial production, manufacturing activity in the New York region and the balance of foreign and domestic investment in U.S. securities.Tuesday, December 17
The U.S. is to release data on consumer inflation and the current account.Wednesday, December 18
New Zealand is to produce private sector data on business confidence, a leading indicator of economic health.
The U.S. is to release data on building permits, a leading indicator of future construction activity, and housing starts.
The Federal Reserve is to announce its federal funds rate and publish its rate statement, which outlines economic conditions and the factors affecting the monetary policy decision. The U.S. central bank is also to publish its economic projections for the next two years. The rate announcement is to be followed by a press conference with Chairman Ben Bernanke.
Later Wednesday, New Zealand is to release data on third quarter gross domestic product, the broadest indicator of economic activity and the leading indicator of economic growth.Thursday, December 19
The U.S. is to publish data on existing home sales, manufacturing activity in the Philadelphia region and initial jobless claims.Friday, December 20
The U.S. is to round up the week with revised data on third quarter GDP.
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