NZD unable to maintain momentum under weight of USD rebound
Daily Currency Update
The New Zealand dollar retreated through trade on Friday, unable to sustain the week's upward momentum into the close under the weight of a near term USD correction. Having pushed above US$0.64 the NZD retreated. The University of Michigan consumer sentiment index printed comfortably above expectations, while strength across equity markets and an extended decline in gas prices helped underpin consumer confidence gains. With markets all but fully pricing in a July rate hike from the Fed, the USD found momentum into the weekly close.The NZD continues to outperform key counterparts outpacing the AUD, JPY, Euro, and GBP last week and our attentions turn now to domestic Services PMI data ahead of a host of Chinese economic activity markers. Q2 GDP, industrial production, retail sales, and employment date headline a crowded docket. With China data and Yuan performance a key headwind preventing further NZD upside a rebound across the board, coupled with the potential issuance of new stimulus from the Peoples Bank of China, could help the NZD re-gather last week's early momentum.
Key Movers
The US dollar found support through trade on Friday, stabilising and retracing losses given up against key counterparts. After moving steadily lower through the week the USD found support in stronger than anticipated consumer sentiment data. The University of Michigan consumer sentiment index printed comfortably above expectations, while strength across equity markets and an extended decline in gas prices helped underpin consumer confidence gains. Future markets worked to price a 90% probability of a 25-point rate hike at the end of the month, helping treasury yields rebound through Friday. Two-year yields jumped 13 basis points into the weekly close while 10 year notes climbed 7 points to 3.83%. With the dollar entering oversold territory on Thursday Friday’s rebound is likely a near term consolidation after a week of losses. Having approached a break above 1.1250 the Euro opens this morning buying 1.1230, while Sterling has tracked back below 1.31 and USD/JPY is back above 138.50 after marking near two-month lows at 137.35 on Thursday.Our attentions turn now to China's Q2 GDP data and monthly activity indicators. There is some scope to suggest the PBOC will introduce new stimulus measures after last month’s surprise 10 point rate cut and we are keenly attuned to any signal that marks re-ignite activity across the world’s second largest economy.
Expected Ranges
- NZD/USD: 0.6280 - 0.6420 ▼
- NZD/EUR: 0.5580 - 0.5720 ▼
- GBP/NZD: 0.9250 - 0.9330 ▲
- NZD/AUD: 2.0480 - 2.0720 ▼
- NZD/CAD: 0.8350 - 0.8450 ▲