On Friday, the New Zealand dollar rebounded after sliding 1.4% over the last two days. NZD/USD traded at about 0.6017, up 0.70% for the day in the European session.
The US jobs report two weeks ago was softer than expected, leading to a meltdown across stock markets globally. Investors feared that the US economy was moving towards a recession but this week, the markets managed to recover due to solid US numbers.
In July, US inflation dropped to 2.9% y/y, slightly down from 3% in June which was also the market consensus. Retail sales in July rose by 1% m/m, bouncing back from June’s -0.2% and much higher than the 0.4% market estimate. Unemployment claims were also lower than market estimates for a second consecutive week.
The financial market rout increased expectations for a 0.5% cut from the Fed to 60%, but this has dropped to 30% since the retail sales report. A 0.25% cut has been priced in at 70%.
The stock market volatility was driven by the US numbers’ strength. The positive data this week has not completely eased investor fears and if new key data is softer than expected, the financial markets may react negatively.
As the market turmoil has eased, the US dollar is showing weakness. The New Zealand dollar was boosted strongly today by risk appetite returning.
