- Westpac
The New Zealand Dollar strengthened versus the U.S. Dollar as better than expected local data contrasted with weaker economic figures in the U.S. and Europe, bolstering allure of local assets. The New Zealand currency was boosted by positive retail sales data, which reinforced expectations interest rates will be lifted again next year. In contrast, the data from the U.S. showed a jump in weekly jobless claims following surprisingly unchanged retail sales, adding to signs the Fed will not rush to hike benchmark interest rate from the ultra low. Meanwhile, reports from Europe suggested the region is still struggling to recover, as growth stalled in the second quarter.
Separately, New Zealand's property market is believed to head for a downturn in the second half of the decade, as migration starts to cool, while increasing mortgage rates make investment less profitable. This indicates a turning point for the market, which has been supported by low interest rates and rapidly increasing population. According to the recent Real Estate Institute of New Zealand data, the national median house price declined 2.6% in July compared with the previous month, but advanced 8.1% from a year earlier. This compares with house-price inflation of above 10% last year before the Reserve Bank of New Zealand introduced measures to cool housing demand, and began raising interest rates in March.
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