Home Daily Commentaries New Zealand dollar continues to hold above $US0.62

New Zealand dollar continues to hold above $US0.62

Daily Currency Update

The Kiwi dollar is slightly stronger this morning when valued against the Greenback. The Kiwi dollar rallied for the second consecutive session on Friday, improving near 0.6250 level during the Asian session. The NZD/USD pair received upward support on improved risk appetite as traders bet on speculation of Federal Reserve’s (Fed) rate cuts in March and May despite upbeat inflation data from the United States. Additionally, the moderate Chinese inflation data seems to reinforce the strength of the New Zealand dollar, given the close trade ties between the two nations. China’s Consumer Price Index (CPI) fell 0.3% YoY in December after dropping 0.5% in November. The market forecast was a decrease of 0.4%. Chinese CPI inflation rose to 0.1% over the month in December versus the -0.5% figure seen in November and an acceleration of 0.2% estimated. China’s Producer Price Index (PPI) dropped 2.7% YoY in December, as against a 3.0% decline in November. The data missed expectations for a 2.6% decline in the reported period.
Looking ahead this week on the local data front and on Tuesday we will see the release of the New Zealand Institute of Economic Research (NZIER) survey which is a leading indicator of economic health - businesses react quickly to market conditions, and changes in their sentiment can be an early signal of future economic activity such as spending, hiring, and investment. On Thursday we will see the release of the Food Price Index (FPI). Although food is among the most volatile consumer price components, this indicator garners some attention because New Zealand's major inflation data is released on a quarterly basis. Finally, on Friday we will see the release of the NZ Visitor Arrivals. Tourism plays an important role in the economy, about 7% of the population is employed by the tourism industry, and a sizable portion of the nation's GDP is indirectly related to tourism.

Key Movers

The US dollar gave up its early gains on the back of Friday's weaker than expected PPI readings for December with the decline in short term yields prompting a decent move higher across the board. U.S. producer prices unexpectedly fell in December amid declining costs for goods such as diesel fuel and food, suggesting inflation would continue to subside and allow the Federal Reserve to start cutting interest rates this year. The report from the Labor Department on Friday, which also showed prices for services were unchanged for the third straight month, implied that a pick-up in consumer prices last month was likely a blip. It led economists to anticipate that the key price measures tracked by the U.S. central bank for its 2% inflation target rose moderately in December from the prior month. The producer price index for final demand dipped 0.1% last month, the Labor Department's Bureau of Labor Statistics said. Data for November was revised to show the PPI falling 0.1% instead of being unchanged as previously reported. The PPI has now declined for three consecutive months.

In the UK Britain's economy grew slightly more strongly than expected in November but remains at risk of slipping into a mild recession, a potential blow for Prime Minister Rishi Sunak before an election expected in 2024. Gross domestic product (GDP) expanded by 0.3% after a fall of 0.3% in October. Sterling was little changed against the U.S. dollar after the data, but government bond yields fell as markets priced in a slightly higher chance that the Bank of England (BoE) will begin to cut interest rates in May. Britain's economy struggled to gain momentum in 2023, as households were squeezed by rapid inflation and the highest BoE interest rates in 15 years.

Expected Ranges

  • NZD/USD: 0.6100 - 0.6300 ▲
  • NZD/EUR: 0.5550 - 0.5750 ▲
  • GBP/NZD: 2.0200 - 2.0400 ▼
  • NZD/AUD: 1.0550 - 1.0750 ▲
  • NZD/CAD: 0.8200 - 0.8400 ▼