RBNZ in focus as NZD tracks within narrow range
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Daily Currency Update
The NZD traded within a narrow range through much of Tuesday as investors maintained positions ahead of a key RBNZ policy update and a deluge of key macroeconomic items through the end of the week. While NZ yields rose yesterday the NZD tracked within a 25-point handle bouncing between US$0.6154 and US$0.6179. Our attention now turns to the RBNZ policy update and official rate announcement. Pricing for another rate hike has climbed in recent weeks ensuring the NZD has outperformed key counterparts in the AUD and JPY and this month’s policy update will prove key in determining near-term direction. While we are only pricing a 20-25% chance of a rate hike this month a hawkish undertone may be enough to help the NZD maintain momentum. Inflation pressures continue to linger above the RBNZ target range and the bank has aggressively pushed back against calls for a cut. With supports in tact above US$0.61 we are watching any move above US$.62 and resistance at US$0.6220 as key technical markers of direction.Key Movers
Price Action across major currencies was muted through trade on Tuesday with the USD steady and the DXY index largely unchanged as the euro and GBP tracked within a narrow range. Investors appeared content in monitoring positions ahead of a slew of key headline macroeconomic items crowding the docket into the end of the week. The biggest news yesterday was Japanese CPI data. Inflation pressures rose across all three measures, ensuring both headline and core inflation printed above consensus lifting 2-year Japanese Government Bonds to their highest level since 2011 and nudging the yen higher against all major counterparts. Markets ignored a downside surprise in US core durable goods orders and consumer confidence data instead shifting attention to this week’s all-important PCE index update. The PCE deflator is the Fed’s preferred measure of inflation and with markets on edge after the hotter-than-anticipated CPI print earlier this month, we expect plenty of volatility following the print as markets adjust rate cut expectations.Expected Ranges
- NZD/USD: 0.6100 - 0.6250 ▲
- NZD/EUR: 0.5600 - 0.6020 ▲
- GBP/NZD: 2.0400 - 2.0600 ▼
- NZD/AUD: 0.9350 - 0.9480 ▼
- NZD/CAD: 0.8280 - 0.8420 ▲