New day, same old story; NZD under pressure as rates higher and yields steepen
Daily Currency Update
The NZD tumbled through trade on Tuesday amid an extension in the risk-off narrative driven by higher global rates and steeper yield curves. With little of note on the domestic docket, the NZD appeared resilient through the early half of the domestic session before starting to track lower into the local close giving up US$0.5950 and sliding quickly toward US$0.59. Demand for the USD increased after a stronger-than-expected US JOLTS jobs report drove an extension in the bear steepening for US treasuries, pushing 10-year rates up 11 basis points to 4.79% while two-year rates are now comfortably above 5%. Having marked intraday lows at US$0.5890 the NZD opened this morning buying US$0.5908.Our focus now turns to US ISM Services data. After the surprise uptick in August, we expect a modest retracement this month. Another shock to the upside will only elevate the current narrative and heap more pressure on an already embattled NZD.
Key Movers
The US dollar continues to extend its upward run, advancing against all counterparts, excluding the yen, through trade on Tuesday. The USD DXY index hit a fresh 2023 high following the JOLTS Job report wherein job openings unexpectedly rose through August. After a run of declines, the sharp uptick surprised investors and points to lingering resilience within the labour market, firming bets the Fed will be able to maintain higher rates through 2024. With equity markets in freefall and treasury yields steepening, the US dollar enjoyed modest gains against both the euro and GBP forcing the euro briefly below US$1.0450 and the GBP toward US$1.2050. While the USD climbed above ¥150 after the jobs data a quick collapse saw it move back toward ¥147 before settling at ¥149. While there is no official confirmation of intervention from the Ministry of Finance it appears it at least made inquiries with banks as to pricing, which was enough to trigger the correction.Our attention now turns to commentary from European Central Bank president Lagarde while US ISM services data dominates the macro docket ahead of Friday’s all-important Non-farm payroll print.
Expected Ranges
- NZD/USD: 0.5880 - 0.5980 ▼
- NZD/EUR: 0.5600 - 0.5700 ▼
- GBP/NZD: 2.0200 - 2.0600 ▲
- NZD/AUD: 0.9320 - 0.9420 ▲
- NZD/CAD: 0.8020 - 0.8150 ▼