Kiwi starts week on weaker footing with key markets closed, US GDP digested

The New Zealand dollar started the week on a weaker footing, with bank holidays in the US, China and the UK today likely to keep trading subdued, and after an upward revision in US economic growth underwhelmed the market

The kiwi declined to 70.44 US cents as at 8am in Wellington, down from 70.71 cents in New York on Friday and up from 70.14 cents in Asia at the end of last week.The trade-weighted index slipped to 76.32 from 76.47 in New York.

US first-quarter gross domestic product grew a revised annual 1.2 percent in the first quarter, up from an initial estimate of 0.9 percent, the Commerce Department said. That was the weakest rate in a year as the US economy slowed from a 2.1 percent pace in the fourth quarter, but other indicators of the world's biggest economy have pointed to a sturdier rate of growth.

"US economic growth slowed less sharply in the first quarter than initially thought, but the weakness was likely an aberration amid a strong labor market that is near full employment," traders at HiFX said in a note.

Still, US consumer confidence slipped this month, with the University of Michigan's Consumer Sentiment Index revised down to 97.1 in its final reading for May, from a preliminary reading of 97.7. Market bets are still that the Federal Open Market Committee will announce an interest rate increase at the end of its next two-day meeting on June 14. The FOMC earlier tipped the potential for three hikes in 2017.

With little domestic economic news scheduled, traders will likely look for offshore events to drive the direction to the kiwi. European Central Bank President Mario Draghi's appears before the European Parliament Economic Committee today. Expectations are rising that the ECB will signal that its easy policy stance might need to be tweaked if euro-zone data continue to paint a more positive economic outlook.

In the US, the Fed also releases its Beige Book on Wednesday.

The kiwi fell to 94.68 Australian cents from 94.96 cents in New York on Friday and fell to 4.8269 yuan from 4.8433 yuan.

The kiwi declined to 63.03 euro cents from 63.28 cents and dropped to 54.99 British pence from 55.18 pence. The local currency fell to 78.34 yen from 78.60 yen.

(BusinessDesk)