NZD continues to outperform despite no obvious catalyst
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Daily Currency Update
The New Zealand dollar crept upward through trade on Tuesday, outperforming for no obvious reason. Despite weaker demand for risk and sustained strength across US rates the USD retreated allowing the NZD to mark intraday highs at US$0.6187. Chinese banks unexpectedly cut the 5-year loan rate by 25 basis points, the largest move in 5 years in a bid to support the moving market and drive consumer spending in an economy battling growth and deflationary pressures. The move added some support to the NZD yet still falls well short of the stimulus needed to reinvigorate the ailing economy. Domestically the GDT dairy auction showed a half percent increase, helping add support to the NZD.Our attention now turns to PPI data and Australian wage data as the big-ticket items on the macroeconomic agenda.
Key Movers
The US dollar is broadly weaker this morning despite US rates holding firm against major counterparts and risk appetite faltering. The euro pushed up through US$1.08 after wage inflation while contracting remained too high for comfort. Wages rose 4.5% in Q4 down from 4.7% in Q3. While contracting still remains elevated and dampened expectations for a European Central Bank rate cut in April. The GBP climbed back above US$1.26, touching highs at US$1.2667 despite markets bringing forward bets for a rate cut with August firming as a likely starting point while the USD slipped below ¥150 against the JPY. The Canadian dollar was the day's biggest loser after softer CPI inflation numbers fell faster than expected in January. The headline rate fell to 2.9% year on year, putting it back within the Bank of Canada's target range, while trimmed mean CPI remains just outside the 2-3% target band at 3.35%. The soft read saw markets bring forward rate cut expectations with a 50/50 chance of an April rate cut now priced in.Our attention now turns to the Australian Wage data, and NZ PPI data ahead of the Federal Open Market Committee meeting minutes early tomorrow morning.
Expected Ranges
- NZD/USD: 0.6050 - 0.6200 ▲
- NZD/EUR: 0.5680 - 0.5750 ▼
- GBP/NZD: 2.0200 - 2.0500 ▲
- NZD/AUD: 0.9350 - 0.9450 ▲
- NZD/CAD: 0.8300 - 0.8400 ▲