Kiwi Appreciates On Expectation-Beating Q2 GDP Outturn

The kiwi dollar has popped higher on the release of above-forecast NZ Q2 GDP data this morning, which allows NZD/USD to tick away from new cycle lows printed Wednesday.

• The pair oscillated within a relatively a narrow range yesterday, touching fresh multi-year lows at $0.5977 in the process. Deeper losses were prevented by USD/JPY sales which sapped strength from the BBDXY index.
• Equity sentiment was mixed Wednesday, with European benchmarks trading in the red and U.S. indices eking out some gains, with the VIX index easing off. The aggregate Bloomberg Commodity Index advanced.
• New Zealand's economy grew at an annual rate of 0.4% in Q2, beating expectations of a flat reading. On a sequential basis, GDP rose 1.7% versus the median estimate of 1.0%, after a 0.2% contraction in Q1. Still, the outturn for quarterly growth missed the RBNZ's +1.8% projection from the Aug MPS.
• Note that manufacturing (down 5.9% Q/Q) created the largest drag on the headline reading, which draws attention to the next BusinessNZ M'fing PMI reading to be published tomorrow.
• RBNZ pricing remains within recent ranges after the release, with a 50bp OCR hike fully priced for the October MPC meeting, but NZGB yields have moved higher. Spot NZD/USD trades +20 pips at $0.6023 after testing yesterday's highs.
• From a technical standpoint, bulls look for a rally towards Sep 13 high/50-DMA at $0.6161/0.6202. Bears keep an eye on yesterday's low point at $0.5977, followed by the 76.4% retracement of the 2020 - 2021 rally at $0.5941.