The Kiwi dollar gained ground against the loonie yesterday following the release of worse-than-anticipated Canada building permit data for March. But for the weak New Zealand services index data, the New Zealand dollar’s gains would have been much higher. Overall, the NZD/CAD pair rallied from a low of 0.8213 to a high of 0.8245 in the past 24 hours.
According to BusinessNZ, the New Zealand services index inched down to a 27-month low of 47.10 in April from 47.20 in the previous month. A reading below 50 indicates a contraction of the sector, and vice versa.
All the sub-sector indices recorded a reading below 50, signaling widespread contraction of the sector. Specifically, the activity/sales index stood at 46.50 in April. Likewise, the new orders/business index fell to 47.10. The employment index hit 47.10, reflecting the lowest level since February 2022. Similarly, the supplier deliveries index decreased to 47.60, reflecting the lowest level since November 2022. The stock index dipped to 46.60.
The percentage of negative comments from businesses increased to 66.30% in April from 63% in March and 57.30% in February.
BNZ Senior Economist Doug Steel stated that merging the current weak Purchasing Managers’ Index (PMI) with last week’s Performance of Service Index (PSI) produces a composite assessment indicative of a GDP trajectory likely to remain below levels observed a year ago until mid-year. This aligns with our projections, with the combined index indicating potential downside risks to our forecasts.
According to Statistics Canada, the country’s building permits plunged 11.70% m-o-m in March to C$10.50 billion after increasing by 8.90% in the previous month. The reported reading was worse than forecasts of a 4.60% decline.
Construction intentions in the non-residential sector fell by 16.70% m-o-m in March to C$4 billion. Specifically, industrial construction declined by 46.10% (or C$629.80 million). Institutional construction fell by 22.20% (or C$293.10 million).
Likewise, construction intentions in the residential sector fell by 8.30% to C$6.50 billion.
The commercial sector grew by 5.80% m-o-m in March to C$2.20 billion. The cumulative value of building permits was C$33.40 billion in the March 2024 quarter, a 3.70% rise from the December 2023 quarter reading of C$32.20 billion.
In the non-residential sector, construction intentions rose by 6.90% in the March 2024 quarter to C$13 billion. The increase was led by the commercial sector, which grew by 22.30% to C$6.60 billion.
The value of residential building permits inched up 1.80% in the March 2024 quarter.
The weak Canada building permits data is expected to keep the NZD/CAD pair slightly bullish in the short term.
The historical price chart indicates that the NZD/CAD pair is ascending after testing the support at 0.8215. The next resistance is anticipated to be only near 0.8375. Additionally, the currency pair is trading above its 50-day moving average, while the stochastic indicator is in the bullish zone. Therefore, we anticipate the NZD/CAD pair to remain in an uptrend in the near term.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
