Contraction Milder Than Forecast Over Latest Lockdown

The monetary policy announcement from the Fed pushed everything else into the background on Wednesday, with a broader risk-on reaction driving a rally in NZD/USD in U.S. hours. The Fed doubled the pace of asset purchase taper and projected three rate hikes in 2022, but Chair Powell suggested that the economy can handle Omicron.

• The contraction in New Zealand's GDP was smaller than expected in Q3. The economy shrank 3.7% Q/Q, reversing the downward revised Q2 growth of 2.4%, but Bloomberg consensus forecast looked for a 4.1% contraction.
• Stats NZ commented that "the four industries with the largest falls in activity were retail, accommodation, and restaurants; manufacturing; construction; and arts and recreation as they were the most affected by lockdown measure."
• Note that quarterly contraction was considerably smaller than the 7.0% projected by the RBNZ in their most recent Monetary Policy Statement, providing another instance of the Reserve Bank's notoriously conservative economic forecasting.
• Elsewhere, New Zealand has reached the milestone of fully vaccinating 90% of eligible residents.
• Looking ahead, monthly ANZ Business Confidence will hit the wires tomorrow.
• NZD/USD trades flat at $0.6783 at typing, the rate had a brief look above yesterday's high this morning. A clearance of Dec 9 high of $0.6823 would turn focus to Dec 1 high of $0.6868. Meanwhile, a fall through Dec 15 low of $0.6702 would clear the way to Nov 2 low of $0.6589.