NZD under pressure again as risk off mood extends into a new week
Daily Currency Update
The New Zealand dollar tracked lower through trade on Monday, starting the new week on the back foot as markets endured another risk off run. Having pushed off lows approaching US$0.59 mid last week the NZD tested a break above US$0.60 late in the domestic session before falling steadily overnight. Weaker than anticipated Chinese PMI data from the weekend, with the Caixin manufacturing and non-manufacturing index’s missing expectations by a wide margin coupled with higher and steeper yield curves sapped investor demand for risk prompting a move away from risk assets and equities. The NZD traded toward intraday lows below US$0.5950, touching US$0.5944.Our attention turns now to the domestic quarterly survey of business conditions. We are looking for any sign of further easing in the labour market, a downturn in capacity and inflation expectations and trading activity data as indicators of potential growth through Q3. After a surprise rebound in Q2, a solid uptick in GDP expectations could help add a floor beneath the NZD at least against key major crosses.
Key Movers
A risk off mood has again fueled demand for the US dollar, allowing the DXY dollar index to recover last week's late losses and test 2023 highs near 107. Amid a backdrop of higher rates and steeper yield curves the Yen marked a new low for the year giving up more ground and stopping just short of allowing the USD a break above 150. A break above this level would all but guarantee intervention from the Ministry of Finance and the Bank of Japan. The Euro tumbled back below 1.05 marking new lows at 1.0480 while the GBP gave up 1.21, trading as low as 1.2080.Our attention today turns to the US Jolts report as the labour market remains in focus while commentary from Fed speakers could provide valuable insight into this month's policy meeting. With no shift in the risk narrative on the horizon the USD should remain well bid.
Expected Ranges
- NZD/USD: 0.5900 - 0.6000 ▼
- NZD/EUR: 0.5650 - 0.5720 ▼
- GBP/NZD: 2.0250 - 2.0420 ▼
- NZD/AUD: 0.9280 - 0.9380 ▲
- NZD/CAD: 0.8080 - 0.8180 ▼