Daily Currency Update
The New Zealand dollar is slightly stronger when valued against the Greenback. The Kiwi dollar recovered its recent losses and traded around US$0.6100 overnight which received upward support off the back of a decline in US Treasury yields. On the data front yesterday New Zealand's Business NZ Performance of Services Index (PSI) for December was recorded at 48.8, down from 51.2 in November. Furthermore, concerns about China's growth momentum persist, driven by factors such as a property crisis, and sluggish consumer and business confidence. These concerns are contributing to downward pressure on the Kiwi dollar, which in turn, undermines the NZD/USD pair. On Wednesday, attention will turn to New Zealand's Consumer Price Index (CPI) data for the fourth quarter. Headline CPI is expected to rise by 0.5% quarter-on-quarter vs. 1.8% in Q3, while the year-on-year rate is expected at 4.7% vs. the prior release of 5.6%. If so, it would be the lowest since Q2 2021. The RBNZ’s Q4 CPI projection is higher at 0.8% QoQ and 5.0% YoY.
Key Movers
In the US, economic data featured the Richmond Fed Composite and Manufacturing Index experienced a decline, moving from -11 to -15 in January. Conversely, the Services Index saw an improvement, rising from 0 to 4. Although the data was mainly ignored by investors, they had priced out the Federal Reserve’s March 2024 rate cut, pushing it back toward May. A week ago, investors anticipated the Federal Reserve to implement rate cuts totalling 175 basis points in 2024. However, as of writing, they modified their expectations to 141 basis points of monetary easing, effectively reducing their forecast by one rate cut. Ahead of the week, the US economic calendar will feature the US Gross Domestic Product (GDP) for last year’s Q4, along with Initial Jobless Claims and the Fed’s preferred gauge for inflation, the Core Personal Consumption Expenditure (PCE) price index.
Expected Ranges
- NZD/USD: 0.5990 - 0.6190 ▲
- NZD/EUR: 0.5500 - 0.5700 ▲
- GBP/NZD: 2.0730 - 2.0930 ▼
- NZD/AUD: 1.0700 - 1.0900 ▼
- NZD/CAD: 0.8100 - 0.8300 ▼