NZD rally continues as attentions shift toward another US inflation update
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Daily Currency Update
The New Zealand dollar outperformed again through trade on Tuesday, supported by higher commodity prices. While net gains were modest the global reflation narrative continued, buoyed by sustained strength across key industrial metals. Spot gold prices reached fresh record highs, allowing the NZD to extend gains beyond US$0.6000 and mark intraday highs at US$0.6080 before settling near US$0.6050.Our attention now turns to this afternoon's RBNZ monetary policy announcement. We anticipate a tone matching that proffered in February with policy makers elected to leave rates on hold for now. We expect the bank will be hesitant in guiding toward policy easing and with no new projections released this month market reaction should be somewhat muted. Beyond the RBNZ we look to US CPI data and the Federal Open Market Committee minutes to guide direction. US yields and inflation expectations continue to be critical drivers in the near-term NZD value and we expect volatility through the overnight sessions and markets respond and adjust positions in response to the data updates.
Key Movers
Price action across major was largely muted through trade on Tuesday as investors sideline major bets ahead of tonight’s all-important US CPI update. US treasury yields edged lower pairing some of last week post Non-farm payroll gains while the USD tracked sideways against most counterparts, flat against the euro, yen and GBP and thus flat on an indexed level. Reports the Bank of Japan is considering raising its inflation forecast at its next policy meeting on April 26th had little market impact and the USD continues to test resistance on moves approaching ¥152. The euro traded between US$1.0850 and US$1.0890, while the pound tested a break above US$1.27 before tracking between US$1.2660 and US$1.2680 through the latter half of the overnight session.Our attention now turns to US CPI inflation data tonight, with both headline and core CPI anticipated to increase at a moderated pace. Month-on-month growth should print near 0.3%, an upside surprise will likely diminish expectations for a June rate cut and could well lend the USD near-term support while a softer read affords the Fed some scope in bringing forward any planned rate adjustment. The Federal Open Market Committee minutes will prove useful in understanding the Fed's thinking and just how much expectations for monetary policy have changed.
In other news the Bank of Canada is expected to leave rates on hold, striking a dovish tone as inflation continues to moderate and employment conditions deteriorate.
Expected Ranges
- NZD/USD: 0.5980 - 0.6120 ▲
- NZD/EUR: 0.5520 - 0.5620 ▲
- GBP/NZD: 2.0800 - 2.1000 ▼
- NZD/AUD: 0.9100 - 0.9200 ▲
- NZD/CAD: 0.8170 - 0.8270 ▲