New Zealand’s long-term credit rating outlook was cut to negative by Fitch within the last 15 minutes. In their report, Fitch stated that the island country could fall into a Japnese-style low-growth trap. They cited budget deficiencies and said that the country may need stronger fiscal adjustments. As a result of the poor budget stance, the country has undergone rising foreign indebtedness that should be taken with caution.
Our chart below shows the immediate reaction of the market to the news. The NZD/USD plummeted approximately 50 pips. From the start of the session, the pair has declined 1.1% while the NZD/JPY has fallen 1.4%.
