NZD/USD STAYS BEARISH AROUND 0.6150 AS DOWNBEAT NZ GDP JOINS CREDIT SUISSE, SVB WOES

NZD/USD remains depressed near 0.6160, down for the second consecutive day, despite paring intraday losses heading into Thursday’s European session of late.

The Kiwi pair bears the burden of the downbeat prints of New Zealand’s (NZ) fourth quarter (Q4) Gross Domestic Product (GDP), as well as the market’s fears emanating from the latest bank fallouts in the US and Europe. It’s worth observing that the headlines suggesting improvements in economic conditions of China, one of New Zealand’s key customers, seem to join sluggish yields to probe the bears in the last few hours.

Earlier in the day, NZ Q4 GDP slid to -0.6% QoQ versus -0.2% market forecasts and 2.0% previous readings. Further, the YoY figures also eased to 2.2% compared to the 3.3% expected and 6.4% in previous readings. The figures become more worrisome as Bloomberg quoted Anthony Walker, a director of sovereign ratings for Australia, New Zealand and the Pacific at S&P on Wednesday to mention that "New Zealand’s credit grades with S&P Global Ratings could come under pressure if the nation’s current account deficit remains too big." It should be noted that the national Current Account Deficit shrank to $-9.45B in Q4, from $-10.2B in Q3. However, the Current Account – GDP Ratio slumped to -8.9% from -7.9% prior and -8.4% market forecasts.

Elsewhere, the latest fears emanating from Europe’s G-SIB – a global systemically important bank, namely Credit Suisse, renew fears of the 2008 financial crisis as it follows fallouts of the US banks, namely Silicon Valley Bank (SVB) and Signature Bank. Also highlighting the fears are headlines from Bloomberg suggesting China’s securities regulator is holding up approvals for new applications to sell global depository receipts, according to people familiar with the situation, potentially choking off a lucrative stream of listings in Europe.

On the positive side, news that Credit Suisse eyes borrowing up to CHF50 billion from the Swiss National Bank (SNB) to strengthen liquidity gained major attention and allowed NZD/USD bears to take a breather. On the same line could be the news that anonymous sources conveyed that the US banks are less vulnerable to the Credit Suisse debacle. Furthermore, the emergency talks by the Bank of England (BoE) and market chatters suggesting no immediate negative reaction by the Federal Reserve (Fed) and ECB, during their monetary policy meetings, also seem to tame the previous risk aversion. Recently, Goldman Sachs came out with its upwardly revised economic forecasts for China and tried to put a floor under the NZD/USD prices.

Against this backdrop, the S&P 500 Futures rise 0.40% intraday to reverse the previous day’s losses around 3,940 whereas the US 10-year Treasury bond yields stabilize around 3.48% after falling the most in four months on Wednesday. That said, the two-year Treasury bond coupons also pause the further downside around 3.94%, after falling to the lowest levels since September 2022.

Looking ahead, risk catalysts and the second-tier US data about employment, manufacturing and housing activities could entertain the NZD/USD pair traders. Though, major attention will be given to the bond market moves and headlines surrounding Credit Suisse, Silicon Valley Bank (SVB) and Signature Bank.