THE TAKEAWAY: Consumer confidence, inflation expectations among New Zealand consumers improve > “Risk-off” theme appears to have taken center stage once again > NZDUSD little changed
The New Zealand Dollar was little changed as business activity showed signs of improvement via a much improved PMI reading at 50.5 in October. A print above 50 indicates strength. Moreover, consumer confidence rose by 3.3 percent in November along with improved consumer inflation expectations which increased by 2.2 percent.
The positive figures proved to weigh very little among the Forex community as the higher yielding kiwi had sold heavily over the last 24 hours of trading. Risk trends appear to have turned dour as measured by the S&P 500 selloff and risk-linked currencies, like the kiwi, traded lower as Forex participants scaled back their risky holdings. Over the last three days the correlation between the S&P 500 and the NZDUSD currency cross has increased to +.7178, up from +.30 on November 13 suggesting that further deleveraging in the equity markets may also coincide with a commensurate move in the New Zealand Dollar.
NZD/USD, Daily Chart
S&P 500, Daily Chart