Forexpros - Last week saw the New Zealand dollar fall to a three-week low against its U.S. counterpart on Friday before pulling back, as concerns that global economic growth was losing momentum combined with worries over sovereign debt contagion in the euro zone prompted investors to shun riskier assets.
NZD/USD hit 0.8273 on Friday, the lowest since July 13; the pair subsequently consolidated at 0.8431 by close of trade on Friday, dropping 4.25% on the week, snapping a streak of five consecutive weekly gains.
The pair was likely to find short-term support at 0.8273, Friday's low and resistance at 0.8667, Thursday's high.
The kiwi bounced off a three-week low on Friday after the U.S. Department of Labor said that nonfarm payrolls rose by 117,000 in July, above expectations for an increase of 95,000, while the previous month's figure was revised up to a gain of 46,000 from a previously reported 18,000.
The unemployment rate dipped unexpectedly to 9.1% from 9.2%, the first decline in four months.
The better-than-expected data failed to ease fears that the U.S. economic recovery was stalling, after a flurry of weak data earlier in the week fuelled concerns over a possible double-dip recession.
Meanwhile, yields on Italian and Spanish bonds surged to euro-lifetime highs earlier in the week, fuelling concerns that the debt crisis could spill over to the region's third and fourth largest economies.
The European Central Bank said Friday it would begin buying Italian and Spanish government bonds in exchange for fiscal reforms, in an attempt to ease investors concerns over the region's ongoing debt crisis.
After markets closed Friday, ratings agency Standard and Poor's downgraded the U.S. sovereign debt rating by one notch to AA+ from AAA, and kept the rating outlook at negative, suggesting a further downgrade could be possible within the next 12 to 18 months.
S&P said the debt ceiling deal reached by lawmakers to cut the federal deficit by an estimated USD2.1 trillion over a decade did not go far enough and "America's governance and policymaking is becoming less stable, less effective, and less predictable than what we previously believed."
In the week ahead, markets will get their first chance to react to the historic U.S. debt downgrade. Traders will also be paying close attention to Tuesday's Federal Reserve rate announcement and its statement on monetary policy for any hints regarding further easing.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets. The guide skips Monday, as there are no relevant events on this date.
Tuesday, August 9
The U.S. is to publish preliminary data on nonfarm productivity and labor costs, which are closely linked to consumer inflation.
In addition, the Federal Reserve is to announce the federal funds rate. The announcement will be followed by the bank's rate statement, which gives important insights into the economic conditions that influenced the rate decision.
Wednesday, August 10
The U.S. is to produce data on the federal budget balance as well as reports on crude oil stockpiles and wholesale inventories.
Thursday, August 11
New Zealand is to release data on manufacturing activity, a leading indicator of economic health.
Later in the day, the U.S. to publish official data on its trade balance, as well as a government report on initial jobless claims and natural gas stockpiles.
Friday, August 12
The U.S. is to round up the week with government data on retail sales, the primary gauge of consumer spending, while the University of Michigan is to produce preliminary data on consumer sentiment and inflation expectations.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
