NZD forced lower as markets concerned disinflation trend running out of puff
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Daily Currency Update
The New Zealand dollar moved lower through trade on Thursday giving up US$0.61 following another US inflation update. The US PCE deflator index printed largely in line with market expectations prompting an immediate USD sell off, allowing the NZD to mark intraday highs just shy of US$0.6110. The move was, however, short lived as closer inspection of the underlying data suggests the deflation trend may be running out of steam, forcing the Fed to maintain the current policy framework for longer. The USD unwound losses, forcing the NZD back toward intraday lows at US$0.6077. Outside a sizeable downturn against the Japanese yen, moves against other majors were largely muted and we turn our attentions to domestic consumer confidence and building data, China PMI data, Euro area CPI data and US manufacturing data for direction into the weekly close.Key Movers
The US dollar closed the day higher against most counterparts despite a downturn in yields and a PCE deflator print in line with market estimates. The much-anticipated inflation update afforded investors some relief in printing more or less as anticipated, sparing analysts another unwelcome inflation surprise. Core PCE rose 0.4% through the month and sits at 2.8% year on year, affirming the unhelpful uptick seen in January, raising questions as to whether the disinflation trend may be faltering. While US yields and the dollar tracked lower immediately following the update, the dollar bounced back, forcing the euro below 1.08 and the GBP near 1.26, off highs just short of 1.2680. In contrast the Japanese yen outperformed, forcing the USD back below 150 and as low as 149.27, following comments from Bank of Japan board member Takata supporting a shift in monetary policy and a move away from yield curve controls and negative rates. The comments contrast those made in December where Takata was at pains to stress the need to remain patient in amending policy and that large scale easing was still required. Having forced the USD lower, the yen made strong gains against the AUD and NZD to key beneficiaries of Japan’s prolonged policy platform.Our attentions turn now to China PMI data, Euro area CPI data and US manufacturing data for direction into the weekly close.
Expected Ranges
- NZD/USD: 0.6050 - 0.6150 ▲
- NZD/EUR: 0.5580 - 0.5680 ▼
- GBP/NZD: 2.0550 - 2.0850 ▼
- NZD/AUD: 0.9300 - 0.9400 ▼
- NZD/CAD: 0.8200 - 0.8300 ▼