According to ANZ, the overall business confidence sentiment among retailers, service retailers and other small businesses in New Zealand has deteriorated for the fourth consecutive month. The index fell from -44.3 in July to -52.3 in August, which compelled the ANZ to adjust the overall business sentiment outlook from "Grim" to "Nothing good to say about it". In the report, it was additionally stated that:
“Employment, investment and export intentions all fell to dismal levels, along with profit expectations. Inflation indicators were weaker despite higher reported costs. […] There has been some debate about whether the Reserve Bank’s unexpectedly large 50bp cut in the Official Cash Rate this month would be positive or negative for confidence and hence business investment and employment. Just over a third of this month’s responses were received after the OCR cut (and the surprisingly strong labour market report).” [source]
Thus, the observed tumbling confidence demonstrates the gradually waning trust in future prospects for improvements in the business conditions. Moreover, the RBNZ's recent decision to cut the interest rate is so far proving to be a divisive issue in the economy, with some participants questioning the need for it at the current rate.
Image source: TradingEconomics.com
The steadily deteriorating business confidence index exemplifies the current economic conditions in the country, and the NZDUSD's substantial bearish trend is being directly impacted by the same economic conditions. The pair has lost 3.86 per cent of its value in August and is currently trading at 0.63030, which is a historically important support level that has been prevailing since September of 2015.
If the NZD/USD manages to break below 0.61970 successfully, the price will start trading at levels that have been last reached in July of 2009, and hence, the pair would be once again nearing areas that were last seen at the wake of the last credit crunch.
Image source: Trendsharks ©, created with TradingView.com
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