NZD unable to sustain gains in face of USD rebound and more yuan selling pressure
Daily Currency Update
The New Zealand dollar tracked lower through trade on Thursday, beaten by a broadly stronger USD, ongoing China concerns, and a risk off mood. While price action was largely well contained the NZD failed to hold onto moves above US$0.62, meeting selling pressure as it approached US$0.6220. Concerns surrounding the China growth outlook and its tepid monetary and fiscal policy response continue to weigh on investors, driving the yuan to fresh lows and capping NZD gains amid proxy selling pressures. With the NZD under pressure, a deeper risk off push forced the currency toward intraday lows at US$0.6175. The Bank of England surprised investors by issuing a larger than anticipated 50-point rate hike. With growth and stagflation concerns now outweighing yield returns, fears a global recession is rapidly approaching weighed on risk demand. Despite GBP softness the NZD was unable to capitalise, slipping back below £0.4850, and while the NZD gave up ground against a host of other major counterparts it enjoyed modest gains against the yen, punching through 88 to mark intraday highs just short of 88.50.Our attentions turn now to Japan’s latest CPI report, global PMI data and commentary from a number of key Federal Open Market Committee board members.
Key Movers
The Japanese yen has been the days big mover, plunging across the board amid further divergence in Bank Of Japan and other Central Bank policies. The Bank of England surprised investors by issuing a larger than anticipated rate hike. Against a backdrop of higher inflation and a robust labour market, policy makers elected to lift rates by 50 basis points in a bid to avoid a vicious wage price spiral. While the GBP enjoyed an immediate boost it was unable to sustain gains as growth concerns outweighed the impact of higher rates on UK yields, forcing the GBP back below 1.2750. With the BoE cash rate at 5% and expected to reach 6%, and Fed Chair Jerome Powell postulating at least one more FOMC rate hike the Bank of Japan’s ultra easy policy stance stands out even more. The yen fell against the USD with the dollar punching above 143, while the Swiss franc moved above record highs not seen since 1979. The yen is now approaching intervention territory and we wouldn’t be surprised if we see a combined Ministry of Finance and BoJ announcement in the wake of today’s CPI update. Our attentions remain affixed to the Japanese yen and the latest CPI inflation report, while Global PMI data and Fed commentary shape direction into the weekly close.Expected Ranges
- NZD/USD: 0.6120 - 0.6220 ▼
- NZD/EUR: 0.5580 - 0.5680 ▼
- GBP/NZD: 2.0480 - 2.0750 ▲
- NZD/AUD: 0.9080 - 0.9180 ▲
- NZD/CAD: 0.8080 - 0.8180 ▼