Forexpros – The New Zealand dollar hit a two-and-a-half month high against its U.S. counterpart on Friday, as risk sentiment was boosted by hopes of progress in addressing the sovereign debt crisis in the euro zone, while Federal Reserve easing speculation pressured the greenback.
NZD/USD hit 0.8106 on Friday, the pair’s highest since May 3; the pair subsequently consolidated at 0.8094 by close of trade on Friday, advancing 1.53% over the week.
The pair was likely to find support at 0.7977, the low of July 20 and resistance at 0.8187, the high of May 1.
Risk sentiment was boosted on Friday following reports that European Central Bank President Mario Draghi is to meet with German central-bank head Jens Weidmann in the coming days to discuss steps to contain the debt crisis, including the purchase of Spanish and Italian bonds.
The kiwi surged over 1.50% against the greenback on Thursday, after Draghi said the ECB will do whatever is necessary to preserve the euro.
German Chancellor Angela Merkel and French President Fran?ois Hollande vowed to defend the euro in a joint statement on Friday and said that they are “deeply committed to the integrity of the euro zone.”
The comments came after the yield on Spanish 10-year bonds surged to a euro-era high of 7.7% on Wednesday, fuelling fears that the country would need a full-scale sovereign bailout, in addition to the rescue package agreed for its banks.
Meanwhile, the greenback remained under pressure, after preliminary data showed that the U.S. economy grew just 1.5% in the second quarter, as consumers slashed spending and businesses grew more cautious about hiring and investing.
The U.S. gross domestic product had grown by an upwardly revised 2.0% in the first quarter.
The data came amid growing speculation the U.S. central bank may announce another round of easing measures at its policy meeting next week, following a string of mixed U.S. economic reports earlier in the week.
Earlier in the week, the Reserve Bank of New Zealand held its benchmark interest rate at 2.50%, in a widely expected move, citing New Zealand’s “poor” economic outlook.
A separate report showed that New Zealand’s trade surplus widened unexpectedly in June, rising to NZD331 million from a surplus of NZD232 million the previous month. Analysts had expected the trade surplus to narrow to NZD77 million in June.
In the week ahead, investors will continue to keep a close eye on developments in the euro zone, as well as monetary policy decisions by the Fed and the ECB.
In addition, Friday’s data on U.S. non-farm payrolls will be highly anticipated as market participants attempt to gauge the strength of the country’s economic recovery.
Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets.
Monday, July 30
New Zealand is to release official data on building consents, a leading gauge of future construction activity.
Tuesday, July 31
New Zealand is to publish a report on business confidence, a leading gauge of economic health.
Meanwhile, the U.S. is to publish official data on personal consumption expenditures price inflation, as well as on employment costs and personal spending. The country is also to release the Standard & Poor’s / Case-Shiller house price inflation report, followed by Chicago’s purchasing managers’ index and industry data on consumer confidence.
Wednesday, August 1
The U.S. is to produce data on non-farm employment change, as well as a report on crude oil stockpiles. The Institute for Supply Management is to produce a report on manufacturing activity.
In addition, the Federal Reserve is to announce its benchmark interest rate. The announcement is to be accompanied by the central bank’s rate statement, which discusses the factors affecting the bank’s policy decision and the economic outlook.
Thursday, August 2
The U.S. is to release government data on initial jobless claims and factory orders, a leading indicator of production.
Friday, August 3
The U.S. is to round up the week with government data on non-farm employment change and the country’s unemployment rate, followed by official data on average hourly earnings, as well as an ISM report on non-manufacturing activity.
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