Home Daily Commentaries New Zealand dollar remains on hold trading above 59 US cents

New Zealand dollar remains on hold trading above 59 US cents

Daily Currency Update

The Kiwi dollar is steady this morning when valued against the Greenback. The NZD/USD pair holds ground near US$0.5900 during the European session on Wednesday, struggling to recover from the previous day’s losses. The rebound in the US dollar is contributing support in undermining the potential of the NZD/USD pair. The NZD/USD pair is currently trading at US$0.5910 at the time of writing.  NZ government bonds were unchanged in the local session yesterday with 10-year bond yields stable at 4.98%. Bonds outperformed swaps which were 2-4bps higher in the belly of the curve. Australian 3-year and 10-year bond futures are about 3bp lower in yield since the local close yesterday. The Food Price Index for August saw grocery food prices again leading the increase, with Stats NZ highlighting the rising prices of eggs. Annual food prices rose 8.9% in August with food and grocery prices rising 10.6%, Statistics NZ says. Annual food prices rose 9.6% in July, with grocery food prices increasing 11.9% and meat, poultry and fish prices rising 9.3% annually. In August, restaurant meals and ready-to-eat food prices increased 8.9%, meat, poultry, and fish prices increased 8.0% while non-alcoholic beverage prices increased 9.1%. Fruit and vegetable prices increased 5.4% annually, Stats NZ said. Looking ahead today, there are no scheduled releases. Tomorrow we will see the release of the BusinessNZ Manufacturing Index which is a survey of manufacturers that asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories.

Key Movers

Overnight, US headline inflation expanded at a 0.6% pace as anticipated by market participants. Core CPI (that excludes volatile oil and food prices) expanded by 0.3%, higher than estimates and July's reading of 0.2%. The US headline CPI, on an annual basis, accelerated to 3.6% from expectations of 3.6% and the prior release of 3.2%. Core CPI matched expectations of 4.3% in a similar period, remaining below the former reading of 4.7%. According to the CME Fedwatch Tool, traders see a 97% chance in favour of an unchanged monetary policy vs. a 93% chance before the US inflation data release for the September monetary policy meeting.

The pound weakened against the dollar on Wednesday after Britain's economy contracted at its sharpest rate in seven months in July as strikes and poor weather weighed on output. Sterling was down as much as 0.4% against the dollar at $1.2442, its lowest level since June 8. The UK economy contracted by 0.5% in July. Figures from the Office for National Statistics (ONS) showed a worse-than-expected contraction of 0.2% and the largest drop in monthly output since December 2022. The Bank of England has raised interest rates 14 times since December 2021, taking them to a 15-year high of 5.25%. Money market traders are pricing in around an 80% chance policymakers will raise interest rates again at next week's meeting and a 20% chance rates will remain on hold. Meanwhile, pricing for the terminal rate has come down to around 5.6%, from more than 6%.

Expected Ranges

  • NZD/USD: 0.5810 - 0.6010 ▲
  • NZD/EUR: 0.5400 - 0.5600 ▲
  • GBP/NZD: 2.0970 - 2.1170 ▼
  • NZD/AUD: 1.0700 - 1.0900 ▼
  • NZD/CAD: 0.7900 - 0.8100 ▼