Home Daily Commentaries NZD resilient despite a deluge of negative sentiment

NZD resilient despite a deluge of negative sentiment

Daily Currency Update

The New Zealand dollar traded largely sideways throughout Tuesday, despite a barrage of negative headlines and stronger than expected US retails sales data. The NZD showed resilience to a weaker yuan after the Peoples Bank of China chose to cut the Medium-term Lending Facility rate to 2.5%. Hopes the move was recognition from authorities of the need for more expansive and comprehensive stimulus programs helped the NZD push toward US$0.60, before fading into the local close and through the overnight session. Stronger than expected US retails sales helped drive gains across US yields, adding to the narrative Fed can now manage monetary policy and ensure a softer economic downturn through 2024. The NZD slipped toward intraday lows below US$0.5950 and opens this morning buying US$0.5949.

Our attentions turn now to the RBNZ policy announcement. With the domestic economy mired in recession and inflation proving stubbornly sticky we expect the RBNZ will leave rates on hold at 5.5% and convey a similar message to previous meetings. We expect little net reaction out of the policy update and instead look to UK retail sales, Euro area GDP, and Chinese Communist Party talks for any signal new stimulus measures will be introduced. With risk sentiment negative we expect the NZD to face ongoing headwinds through the near term.

Key Movers

Despite a plethora of data and a deluge of negative headlines, price actions across major currency markets was relatively muted through trade on Tuesday. Japan GDP surged through Q2 up 1.5%, well beyond market expectations and placed Japan as the fastest growing developed economy through H1. Initially, the print fuelled hopes the BoJ would be forced to move away from its ultra easy policy, but a closer look showed growth fuelled by net exports, while domestic demand remains week, affording policy makers scope to maintain its accommodative policy setting. The yen tracked sideways for much of the day with the USD bouncing between 145.10 and 145.80. With the euro maintaining a narrow trading handle and the Chinese yuan trading through 7.30 and marking fresh lows at 7.33, our attentions shifted to the GBP. Sterling was one of the best performing major currencies overnight, buoyed by stronger than expected wage data. Having climbed back above 1.27, Sterling upside was best realised vs the NZD and AUD where it marked new 3-year lows, forcing the NZD below 0.47. Stronger than expected US retail sales, an uptick in US treasury yields, and sustained negative sentiment helped support the USD and the DXY index held steady through the day.

Our attentions turn now to UK CPI data where we expect further easing in price pressures and Euro Area GDP data.

Expected Ranges

  • NZD/USD: 0.5880 - 0.6020 ▼
  • NZD/EUR: 0.5400 - 0.5520 ▼
  • GBP/NZD: 2.1020 - 2.1420 ▲
  • NZD/AUD: 0.9180 - 0.9280 ▲
  • NZD/CAD: 0.8000 - 0.8100 ▲