Economy Becomes Main Issue as NZD USD Decouples from Equities

NZD USD traders are returning their focus to the New Zealand economy as this pair could be decoupling from the equity markets.

Selling pressure hit the NZD USD late in the week as the Reserve Bank of New Zealand cut its benchmark interest rate by 50 basis points. This cut was already priced into the market but the statement by the RBNZ following the rate cut was not.

The RBNZ is forecasting that interest rates should continue to fall throughout this year as the economy declines, and that it doesn’t see a bottom until 2010. This announcement kept the downside pressure on the market.

Like Australia, New Zealand is susceptible to the Swine Flu. As this disease spreads globally, travel could be limited which would cause a slowdown in tourism. This would interfere with the economy’s ability to recover from its recession.