NZD among worst performers as China activity data missed the mark
Daily Currency Update
The NZD retreated through trade on Monday amid weaker China activity data. In what was otherwise a relatively quiet start to the week, China activity data dominated market attention and unsurprisingly missed the mark. GDP data showed momentum through Q2 slowed considerably, printing just 0.8% quarter on quarter, well down on the 2.2% growth enjoyed through Q1. In comparison, the annualised pace of growth touched just 6.3%, almost 1% short of consensus estimates at 7.1%.With growth slowing and deflationary signs emerging, the yuan tracked lower on the day, spilling over into NZD. Having opened near US$0.6370 the NZD was the worst performer on the day, falling through US$0.6350 and marking intraday lows marginally above US$0.63, before finding support. With most other major counterparts trading within a narrow range, the NZD gave up ground across the board sliding back below AU$0.93, 0.4850 pence and 0.5630 euro.
With little of note on the domestic docket, our attentions are again drawn offshore with US retail sales, Canadian CPI and the RBA minutes driving direction.
Key Movers
Price action across major currencies was largely muted through trade on Monday with the GBP, euro and yen little changed. The NY Empire State survey was the only headline data available overnight and it printed better than expected with leading price indicators showing inflation fell through June. US treasury yields retreated following the data, but a price action across rates and equities was well within recent ranges.The day's big mover was the Chinese yuan. China’s underwhelming activity data weighed on the yuan, allowing the USD to move off 7.15 and back toward 7.20, marking intraday highs just above 7.19. The release of Q2 activity readings amplified fears the Chinese economic engine is losing momentum as Q2 GDP, fixed asset investment and consumer retail sales all fell short of consensus expectations.
With markets crowing for broader stimulus measures, our attentions are affixed to an expected meeting of the Politburo later this month as a potential launching pad to announce new stimulus measures. While the Chinese economy continues to lambast and policy direction/stimulus is left wanting, the AUD and NZD will likely face ongoing headwinds and the USD/CNH will remain a popular carry trade play.
Our attentions today turn to Canadian inflation and US retail sales data for direction.
Expected Ranges
- NZD/USD: 0.6280 - 0.6420 ▼
- NZD/EUR: 0.5580 - 0.5680 ▼
- GBP/NZD: 2.0480 - 2.0820 ▲
- NZD/AUD: 0.9230 - 0.9330 ▼
- NZD/CAD: 0.8280 - 0.8420 ▼