NZD unsteady ahead of key RBNZ policy update
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Daily Currency Update
The New Zealand dollar fell through trade on Tuesday as investors pared recent gains and long positions ahead of tomorrow’s RBNZ Monetary Policy meeting. The NZD has been one of the strongest performing majors through February, stretching long positions on rising expectations the RBNZ may raise rates again.Having opened above US$0.62, the NZD gave up nearly half a cent, trading as low as US$.6163 leading into the end of the local session. With little of note on the offshore docket, the currency then tracked sideways, bouncing between US$0.6160 and US$0.6180 before settling near US$ 0.6170 on open this morning.
Having slipped against the USD, the NZD is weaker against most crosses, down against both the euro and the pound while steady against both the AUD and yen. Japan CPI data will prove key in determining whether the NZD can consolidate and extend on a break above 93. With little on the ticket outside Japan CPI numbers, our attention shifts to tomorrow's RBNZ rate update.
While we expect policymakers will leave rates on hold, there is still an outside chance they lift rates. Such a move will help the NZD consolidate gains against key crosses, while commentary and guidance surrounding future policy will prove key in shaping long-term direction.
Key Movers
Price action across majors was mixed through trade on Monday as the AUD and NZD were among the worst performers, while the euro found some traction on the heels of higher European rates. A steady lift in German bund yields and hawkish commentary from ECB president, Christine Lagarde, allowed investors to pare back ECB rate cut expectations, helping lift the single currency off intraday lows near 1.08 toward session highs above 1.0850.While the GBP showed little net change, the USD is stronger against the Japanese yen, as an extension in US treasury yields heaped more pressure on the embattled yen and allowed the USD to close in on a break above 151.
Our attention turns now to Japan's CPI data, where we expect to see a softening in the annual headline and core inflation pressures. If headline CPI drops below 2% it will become increasingly difficult for the Bank of Japan to justify a move away from negative rates and its current bond-buying program, leaving little room for any meaningful JPY recovery.
US durable goods orders and consumer confidence data round out the macro ticket.
Expected Ranges
- NZD/USD: 0.6130 - 0.6230 ▼
- NZD/EUR: 0.5650 - 0.5750 ▼
- GBP/NZD: 2.0400 - 2.0600 ▲
- NZD/AUD: 0.9380 - 0.9480 ▲
- NZD/CAD: 0.8300 - 0.8400 ▼