NZD under pressure as US treasuries surge upward
Daily Currency Update
The New Zealand dollar remained under pressure through trade on Wednesday, unable to regain upward momentum and seemingly consolidating a break below US$0.59. Having tracked sideways through the early hours of the domestic session, the currency found support in stronger-than-expected China activity data. There was a fair bit of pessimism surrounding the September activity update and a rebound in consumption-led growth helped to lead a short-term improvement in risk demand. The Kiwi dollar jumped to intraday highs at US$0.5920 and seemed set to recover ground lost in the wake of yesterday’s weaker-than-anticipated inflation report. Instead, an overnight surge in US treasuries and sell-off across bond markets forced the NZD back below US$0.59 and toward intraday lows at US$0.5850.Attentions now turn to an all-important update from Fed Chair, Jerome Powell. With officials hinting at a possible end to the tightening cycle amid tighter financial conditions, Powell’s comments could prove crucial in shaping near-term rate expectations, yield prices and USD demand.
Key Movers
The US dollar advanced through trade on Wednesday, dragged upward by higher treasury yields and expectations for at least one more Fed rate hike. US treasuries marked fresh multi-year highs ahead of today’s all-important commentary from Federal Reserve Chair, Jerome Powell. With key FOMC policymakers suggesting tighter financial conditions will be enough to contain inflation Powell’s comments will be crucial in determining near-team rate expectations following a strong of stronger labour market data and sticky price pressures. The USD DXY jumped four-tenths before paring gains and settling. The Euro slipped back below 1.0550 while the GBP slid below 1.2150 despite a higher-than-anticipated inflation print. Headline inflation held steady at 6.7% versus expectations of a dip to 6.6%. That said, Bank of England projections in August still had inflation running near 6.9% so the elevated read did little to change market expectations for monetary policy. We are still pricing just a 25% chance of a hike in November.Attentions now turn to Fed Chair, Jerome Powell and any insight into Fed thinking ahead of the November FOMC policy update.
Expected Ranges
- NZD/USD: 0.5820 - 0.5950 ▼
- NZD/EUR: 0.5520 - 0.5620 ▼
- GBP/NZD: 2.0500 - 2.0900 ▲
- NZD/AUD: 0.9200 - 0.9300 ▼
- NZD/CAD: 0.7980 - 0.8080 ▼