Home Daily Commentaries NZD eyes break above US$0.64 as US Dollar extends Fridays downturn

NZD eyes break above US$0.64 as US Dollar extends Fridays downturn

Daily Currency Update

The New Zealand dollar extended Friday’s upturn through trade on Monday testing a break above US$0.64 amid renewed risk appetite and sustained US dollar weakness. Hopes China is moving closer to rejoining the post-Covid global economy were boosted as officials further eased quarantine restrictions for arriving visitors, elevating risk demand and driving commodity prices and commodity-linked currencies higher.

Having touched highs just shy of US$0.6410 markets looked to consolidate NZD gains as the fallout from Friday’s US non-farm payroll print continue and ISs. The downturn in earnings data has amplified calls for Fed officials to consider slowing the pace of monetary policy adjustment.

With most commentators pricing in a 50-point hike the correction in earning power has prompted some analysts to consider a smaller 25-point adjustment, adding pressures on near-term US treasury yields and driving broader US dollar softness. With little of note on today’s domestic macroeconomic ticket, our attentions turn to commentary from Fed Chair Jerome Powell and any hint or signal policymakers are priming to slow the pace of policy adjustment.

Key Movers

The US dollar fell against most counterparts through trade on Monday as fallout from Friday’s non-farm payroll and ISM service PMI prints continues to drive direction. Despite relatively robust job creation, a downturn in average hourly earnings and a contraction in service activity has amplified calls for a slowdown in the pace of Fed Monetary Policy adjustment.

The contraction in Services PMI offers a clear signal previous Fed rate hikes are beginning to bite and offer some suggestion economic activity is beginning to slow. With most analysts still pricing in a 50-point rate hike at the next FOMC policy meeting our focus turns now to Fed Chair Jerome Powell for any hint or signal policymakers are preparing to slow the pace of policy adjustment while inflation/CPI data Thursday remain key in driving near term direction.

Having fallen short of expectations in December, another downturn in inflation pressures could elevate calls for a slower more measured approach to interest rate adjustment and weigh further on the USD. The Euro and GBP benefited from the US dollar downturn edging higher and testing resistance near 1.07 and 1.22. With little note on their respective macro tickets key US data points will continue to drive direction into the end of week.

Expected Ranges

  • NZD/USD: 0.6280 - 0.6420 ▲
  • NZD/EUR: 0.5880 - 0.6000 ▼
  • GBP/NZD: 1.8980 - 1.9300 ▲
  • NZD/AUD: 0.9180 - 0.9280 ▼
  • NZD/CAD: 0.8480 - 0.8580 ▲