The US Dollar experienced a notable rebound as market participants tread carefully, anticipating upcoming mid-tier US data releases. The cautious market mood is influenced by the economy's recent performance, which has seen a cumulative contraction of 2.2% over the previous two quarters. Despite this rebound, slightly overbought conditions on the daily chart have prompted some investors to take profits.
In New Zealand, the fourth quarter GDP figures reported a 0.7% quarter-on-quarter expansion, surpassing both the market consensus of 0.4% and the Reserve Bank of New Zealand's (RBNZ) projection of 0.3%. This growth was primarily driven by a 0.8% increase in the services sector. However, the construction sector remained a significant drag with a decline of 3.1% quarter-on-quarter.
The positive risk tone in global markets has undermined the appeal of safe-haven assets, including precious metals. The anticipation surrounding the Bank of England's forthcoming monetary policy announcements adds to the cautious sentiment among investors, while comments from ECB President Christine Lagarde have not provided a boost to the Euro.
Economists note that the economy is gradually recovering from a weak base. The expansion in New Zealand's GDP provides a glimmer of hope for an economy that has been grappling with contraction in the preceding quarters. However, the mixed signals in global markets are prompting cautious optimism among investors.
John Maynard Keynes, in his 1933 article on national self-sufficiency, advised those aiming to free a country from its entanglements to proceed slowly and cautiously. Keynes illustrated this point by saying:
"It should not be a matter of tearing up roots but of slowly training a plant to grow in a different direction."
This cautionary approach resonates with current market sentiments as investors navigate through uncertain economic waters.
The US Dollar's rebound comes as investors weigh positive economic indicators against potential risks. With services driving growth and construction remaining a challenge, the path forward requires careful consideration and strategic adjustments.