NZD closes in on break above US$0.6150 as US dollar weakness extended

Daily Currency Update

The New Zealand dollar advance continued through trade on Tuesday, consolidating a break above US$0.61 amid a fall in US treasury yields and firming speculation the Fed has reached the end of its tightening cycle. The NZD tracked higher overnight after Fed and Federal Open Market Committee (FOMC) member Christopher Waller helped firm bets rates have peaked. Waller suggested, “policy is currently well positioned to slow the economy and get inflation back to 2%.” While he did stop short of confirming the Fed will end its program of rate hikes, he did hint at the FOMC being able to lower rates if inflation continues to cool. The promise of lower Fed interest rates forced US treasuries lower, with the majority of the correction loaded into the short end of the curve, allowing equities and risk-led assets to extend gains. The NZD extended toward US$0.6150 falling just short and marking fresh highs at US$0.6145 before meeting resistance. With US dollar weakness the primary driver behind the move gains against other majors were muted as our attentions turned to the RBNZ monetary policy decision and statement. We expect rates will be unchanged at 5.5% as domestic economic activity and inflation data have softened since the last rate hike in May. We expect a neutral tone with policy makers affirming commitment to bringing down inflation.