NZD buoyed by a surge in positive sentiment
Daily Currency Update
The New Zealand dollar rebounded through trade on Thursday, buoyed by an upswing in risk sentiment and a broadly weaker US dollar. China’s Caixin Manufacturing PMI rose back above the line of contraction, surprising investors after a string of weaker data points had elevated fears the Chinese economic recovery had stalled. The yuan, while still soft, pushed back against the USD and dragged the NZD and commodity prices higher. After eyeing a break below US$0.60 late in the domestic session the NZD rallied, extending gains overnight following a string of softer US data sets and confirmation the US debt ceiling bill passed through the House of Representatives. Positive sentiment helped lift the NZD toward intraday highs above US$0.6050 and toward US$0.6080.Our attentions turn now to US non-farm payroll data. We expect payrolls growth of 195-200K for May with a stable unemployment rate and a small uptick in earning data. A print on expectations and sustained labour market tightness elevates calls for the Fed to lift rates later this month and could put pressure on the NZD into the weekly close, while a miss could provide a catalyst to extend the recovery back above US$0.61.
Key Movers
The US dollar underperformed through trade on Thursday relinquishing ground to most major counterparts. Positive sentiment helped lift demand for commodity currencies and elevate the GBP and euro. The upswing in positive sentiment was fueled by reports the US debt ceiling bill had passed through the House and a string of softer data sets forced investors to pare back Fed rate expectations. A seventh consecutive monthly contraction in ISM manufacturing activity coupled with a softer wage narrative helped force rates lower with just 24% of analysts pricing in a June rate hike, well down on the near 70% last Friday, while a July rate hike has been pared back from 100% to a little over 60%. With Fed officials hinting at a pause in June, before resuming hikes in July and/or August, the USD DXY index dropped 0.7% as the AUD, NZD and CAD all climbed 1%, and the euro and GBP enjoyed modest gains punching back above 1.0750 and 1.25.Our attentions turn now to US non-farm payroll data. We expect payrolls growth of 195-200K for May with a stable unemployment rate and a small uptick in earnings data. A print on expectations could elevate calls for the Fed to lift rates later this month and help prop up the USD into the weekly close, while a miss could provide a catalyst to extend the sell off and all but guarantees the Fed will pause its rate hike cycle this month.
Expected Ranges
- NZD/USD: 0.5980 - 0.6130 ▲
- NZD/EUR: 0.5580 - 0.5680 ▲
- GBP/NZD: 2.0480 - 2.0780 ▼
- NZD/AUD: 0.9180 - 0.9280 ▼
- NZD/CAD: 0.8080 - 0.8180 ▼