New Zealand dollar trades above 61 US cents
Daily Currency Update
The New Zealand dollar is flat at the start of the week. In the European session, NZD/USD traded at a daily high of 0.6116, up 0.01%. The uptick of the NZD/USD pair is supported by the modest decline of the Greenback.New Zealand’s economy has struggled in the fourth quarter and the gauge of services activity, the Performance of Services Index (PSI), posted three contractions in the second half of 2023. The PSI improved to 51.2 in November, up from 49.2 in October, indicating weak growth.
Today we will see the release of the December report. For the rest of the week, all eyes will be on New Zealand’s Consumer Price Index (CPI) for the fourth quarter (Q4) due on Wednesday. The New Zealand inflation report will be the key event for the pair. The CPI inflation figures are estimated to show an increase of 0.6% QoQ and 4.7% YoY in Q4.
According to ANZ chief economist Sharon Zollner, the RBNZ is expected to lower the Official Cash Rate (OCR) by 25 basis points (bps) beginning in August, bringing it down from 5.5% to 3.5% over the next 12 months. The NZD/USD is currently trading at 0.6074 at time of writing.
Key Movers
On the US front, the University of Michigan reported on Friday that the Consumer Sentiment Index climbed to 78.8, the highest level since July 2021. The assessment of current economic conditions grew to 83.3, while the expectations component rose to 75.9. The index for January was the highest since July 2021. The index climbed 13.1% month over month, marking its fastest pace of increase since December 2005.The sub-index for the current economic condition increased to 83.3 in January from 73.3 in the previous month. The sub-index for consumer expectations increased to 75.9 in January from 67.4 in November. Expectations of overall inflation for the next 12 months rose to 2.9% in January, marking the lowest reading since December 2020. The metric declined significantly from its peak of 5.4% in April 2022.
Long-run inflation expectations fell to 2.8%, below the 2.9-3.1% range seen for 26 of the last 30 months. On Dec 20, the Conference Board reported that its consumer confidence index for December came in at 110.7, beating the consensus estimate of 104.5.
November’s data was revised downward to 101 from 102 reported earlier. The market sentiment appears to be influenced by the expectation that the Fed may cut interest rates more than other major central banks in 2024, which could exert selling pressure on the Greenback.
Expected Ranges
- NZD/USD: 0.5970 - 0.6170 ▲
- NZD/EUR: 0.5480 - 0.5680 ▼
- GBP/NZD: 2.0800 - 2.1000 ▲
- NZD/AUD: 1.0700 - 1.0900 ▼
- NZD/CAD: 0.8080 - 0.8280 ▼