NZD outperforms amid uptick in domestic rates
Daily Currency Update
The New Zealand dollar tracked within a narrow trading band through Tuesday, holding above US$0.59 and bouncing between US$0.5925 and US$0.5970. With little headline news on hand, an uptick in domestic rates helped add support to the beleaguered NZD. Domestic rates rose yesterday, dragged upward by global forces and local underperformance. It seems markets are pricing in another RBNZ rate hike despite direction from policy makers suggesting the tightening cycle is over. Having touched intraday highs at US$0.5970 the NZD edged lower through the overnight session but remains comfortably above the 9-month low. China is a critical focal point in determining near-term direction and with the People's Bank of China setting its strongest daily fix of the yuan relative to market estimates, making it more expensive for investors to short the yuan and with state banks employed to defend the currency the USD/CNH edged higher on the day, helping add a floor underneath the NZD.Our attentions turn now to global PMI data, central bank commentary and China headlines for direction through the middle of the week.
Key Movers
Price action across major currencies was largely muted Tuesday as investors appeared content in consolidating positions and taking stock against a quieter macroeconomic backdrop. The USD index was little changed as the JPY, AUD and NZD outperformed while the GBP and euro showed signs of weakness. An uptick in global gas prices and a near 10% jump in TTF futures added renewed inflation concerns for the euro area, weighing on the common currency and forcing a break below US$1.0850. Concerns stubbornly sticky inflation pressures, led by food and energy costs spiked Tuesday, elevating fears the European Central Bank will be forced to battle stagflation through Q4 and 2024. With the euro on the backfoot the GBP edge below US$1.2750, down 0.15% amid worries an uptick in gas prices will derail the newly established deflationary forces taking hold in the UK economy. With the Bank of England already expected to raise rates by an additional 75 points an uptick in price pressures will re-ignite growth concerns.Our attentions turn now to Global PMI data ahead of the Jackson Hole symposium on monetary policy.
Expected Ranges
- NZD/USD: 0.5880 - 0.5980 ▲
- NZD/EUR: 0.5430 - 0.5530 ▲
- GBP/NZD: 2.1200 - 2.1600 ▼
- NZD/AUD: 0.9200 - 0.9300 ▲
- NZD/CAD: 0.8000 - 0.8100 ▲