NZD outperforms as USD stumbles following inflation update
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Daily Currency Update
The New Zealand dollar surged through trade on Wednesday, outperforming most majors following an all-important US inflation update. The US CPI report for April printed in line with expectations, a relief for markets and Fed officials after a string of upside surprises. The NZD, having traded sideways leading into the data release, lurched upward, climbing through US$0.6100 to mark intraday highs at US$0.6124 while making gains against the Euro, GBP and AUD.With little of note on the local ticket, Australian labour market data headlines the macro docket. With the NZD climbing back above A$0.9150 softening employment conditions could help the NZD extend its recovery toward A$0.92.
Key Movers
The US dollar fell sharply through trade on Wednesday following the April CPI report. After a string of positive data surprises through January, February and March, April's print was as expected, bringing relief for analysts and Fed officials and allowing investors to temper expectations for another Fed rate hike and firm up bets for a September rate cut. Markets have now priced a 99% probability of a September rate adjustment, up from 81% leading into the print, while 2 cuts are now forecast before year-end. US yields were lower across the curve with both 2 and 10-year rates falling. The USD DXY index gave up 0.7% as the euro lurched back toward 1.09 the GBP climbed toward 1.27 and the yen pushed the US dollar back below 155.Our attention turns now to US jobless claims, Japanese GDP data and the ECB’s Financial Stability Review.
Expected Ranges
- NZD/USD: 0.6050 - 0.6200 ▲
- NZD/EUR: 0.5550 - 0.5650 ▲
- GBP/NZD: 2.0600 - 2.0900 ▼
- NZD/AUD: 0.9080 - 0.9180 ▲
- NZD/CAD: 0.8250 - 0.8400 ▲