Home Daily Commentaries Kiwi falters as markets pare rate hike expectations

Kiwi falters as markets pare rate hike expectations

Matt Richardson
Written by
Matt Richardson

Matt Richardson

OFXpert

Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange.

| Tuesday 13 February, 2024

Daily Currency Update

The New Zealand dollar retreated through trade on Monday as markets pare bets for an RBNZ rate hike. The NZD was unable to extend gains won last week in the wake of a robust labour market update and the ANZ’s shift in guidance and call for two more RBNZ rate increases.

Having climbed near 2% last week, the NZD moved lower as markets moved off bets for a full rate hike with pricing falling to 65%, while the likelihood of an adjustment later this month came off a 50/50 bet and there is now just a 35% chance the RBNZ lifts rates in March.

The NZD is lower against the USD and most major crosses, giving up ground against the AUD, GBP and euro. Our attention now turns to RBNZ inflation expectations and US CPI data as key markers for guidance through trade on Tuesday.

Key Movers

Price action across majors was muted through trade on Monday as Asian markets were closed in observance of the Lunar New Year, while US and European markets offered little in the way of headline newsflow and Tier 1 data.

US equity markets edged higher, while treasuries maintained a narrow range and the USD is marginally higher trading above 104.10. Markets appeared content in managing positions ahead of tonight’s all-important US CPI update. We expect a small month-on-month increase of 0.3% and a year-on-year decline to 3.7%, one step closer to the Fed target at 2%.

A print in line or above expectations affords the FOMC scope to maintain the current setting and their patient approach to rate cuts all but eliminating the possibility of a March adjustment, while a miss to the downside will ensure there is still momentum behind calls for an imminent cut.

With implied monetary policy expectations key in controlling direction, tonight’s print will help shape direction through the week, while UK labour market and wages data will help drive Bank of England and UK rate action.

Expected Ranges

  • NZD/USD: 0.6080 - 0.6180 ▼
  • NZD/EUR: 0.5650 - 0.5750 ▼
  • GBP/NZD: 2.0400 - 2.0700 ▲
  • NZD/AUD: 0.9330 - 0.9430 ▼
  • NZD/CAD: 0.8200 - 0.8300 ▼

Written by

Matt Richardson

OFXpert

As a Senior Corporate Client Manager, Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange. Matt has clients who he has been working with for over a decade, a testament to his knowledge and dedication in the field. Matt is also a regular contributor on Ausbiz, offering clear and precise updates on currency market trends, showcasing his ability to interpret complex financial data into actionable insights.