Home Daily Commentaries NZD stumbles and fails to hold break above US$0.60

NZD stumbles and fails to hold break above US$0.60

Thursday 31 August, 2023

Daily Currency Update

The New Zealand dollar tested a break above US$0.60 through trade on Wednesday following softer US GDP and labour market data. Markets largely ignored an RBNZ announcement it had sold a net $4 billion NZD to build up foreign reserves. With the RBNZ hinting earlier in the year that an update to foreign reserve requirements was required, the announcement came as little surprise and hardly qualified as interventionist policy. Having tracked sideways for much of the domestic session the NZD climbed through US$0.60 marking intraday highs at US$0.6006. Quarter two US GDP data rose at a revised rate of 2.1% lower than most analysts anticipated, while the latest ADP employment report showed the pace of jobs growth slowed to its lowest level in 5 months. With the Fed adopting a data-dependent program the softer-than-expected data added to the ever-increasing likelihood the Fed has reached the end of this tightening cycle.

Our attentions now turn to Friday’s US non-farm payroll print. With labour market momentum slowing a softer-than-anticipated print could be the catalyst the NZD needs to consolidate a recovery above US$0.60.

Key Movers

The US dollar was weaker against most majors through trade on Wednesday after softer-than-expected GDP and labour market data forced another downward correction in US yields and rate expectations. With the DXY on the back foot, the Euro surged back through 1.09, buoyed by stronger regional inflation data. Bund yields rose as markets priced in a higher likelihood that the ECB will hike rates by 25 basis points next month after German CPI showed prices increased 6.4% year on year to August, while Spanish inflation reached a 3-month high. The GBP climbed back above 1.27, dragged upward by the Euro and weaker dollar while the Yen, emboldened by the weaker US rates backdrop held steady at 146.20.

Our attentions now turn to Chinese PMI’s for August. We expected further decline in both manufacturing and service activity. More Euro area inflation data and Japanese retail sales round out the docket leading into Friday’s all-important US non-farm payroll print.

Expected Ranges

  • NZD/USD: 0.5890 - 0.6030 ▲
  • NZD/EUR: 0.5400 - 0.5500 ▼
  • GBP/NZD: 2.1150 - 2.1520 ▲
  • NZD/AUD: 0.9120 - 0.9280 ▼
  • NZD/CAD: 0.8000 - 0.8120 ▲