NZD trips up following softer China data and risk off mood
Friday 12 May, 2023
Daily Currency UpdateThe New Zealand dollar underperformed through trade on Thursday, giving up almost 100 points amid a weaker Chinese economic outlook and risk off backdrop. China inflation and credit data printed softer than anticipated. Credit growth slowed through April as household lending contracted and corporate borrowing fell short of expectations. When coupled with the weak import data earlier this week fears a softened post covid rebound in China will dampen the global economic recovery weighed on investors and commodity prices. With the Yuan weaker against the USD the NZD gave up intraday highs just north of US$0.6380, breaking below US$0.63 to hit session lows at US$0.6290. Having enjoyed a brief upturn in the wake of US CPI data Wednesday the NZD is again firmly entrenched within a familiar trading range. With little of note on the domestic ticket, our attentions turn to US consumer sentiment and inflation expectations data for direction into the weekly close.
Key MoversThe US dollar is stronger this morning as a risk off tone engulfed markets through trade on Thursday. Softer Chinese data added to fears the post Covid rebound is over, while ongoing banking sector turmoil weighed on Investors. PacWest Bancorp reported a near 0% fall in deposits last week, prompting a 20% drop in its share price. A move spilled into other regional banks as evidenced by the KBW index. The US dollar advanced across the board despite a decline in treasuries and further evidence inflation pressures are abating and the labour market is softening. With the dollar higher the GBP gave up 1.26, crashing back toward 1.25 after the Bank of England policy update. The MPC voted to lift the cash rate by 25 basis points to 4.5% while maintaining a tightening bias. The bank noted it is closely monitoring inflation but expects it will fall from 10% back to 5% before the year's end. Markets, while pricing in at least one more 25-point hike pared back policy expectations for the rest of the year driving 2 year rates down and forcing the GBP lower. The Euro followed the GBP lower finding support marginally above 1.09 while the JPY performed better than most majors amid a lower global rates backdrop.
Our attentions turn now to UK GDP data, where we expect very little growth as the economy edges ever closer to a recession, and US consumer sentiment data.
- NZD/USD: 0.6250 - 0.6380 ▼
- NZD/EUR: 0.5730 - 0.5830 ▼
- GBP/NZD: 1.9720 - 2.0080 ▲
- NZD/AUD: 0.9350 - 0.9450 ▲
- NZD/CAD: 0.8450 - 0.8550 ▲