NZD underperforms ahead of RBNZ policy meeting
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Daily Currency Update
The New Zealand dollar traded lower through trade on Monday, giving up US$0.6130 and sliding back toward US$0.61. With little of note on the macro docket to start the week the NZD traded sideways through the early part of the domestic session, supported by a surge in metal prices underpinning commodities before facing selling pressure through overnight trade.Investors appeared content in pairing gains and taking profit ahead of Wednesday's RBNZ policy meeting. The NZD slid to intraday lows at US$0.6097 before settling between US$0.61 and US$0.6110. Our attentions are squarely fixed on tomorrow’s RBNZ policy update.
We expect rates will be left at 5.5% with officials repeating a message of patience as they push toward their main goal of bringing inflation back to target. A hawkish lilt could help the NZD extend recent G10 gains as it maintains its attractiveness as a key carry trade.
Key Movers
The USD started the week on the front foot, advancing against most counterparts amid an uptick in US treasury yields. While the euro and British pound showed little net movement, the JPY was again a notable underperformer. The USD pushed back above 156 and appears set to test BoJ and MoF resolve, seeking to extend gains despite reports the BoJ plans to ease its Quantitative Easing program further and yield curve controls.With US Treasury Yields trading higher across the curve, yen weakness followed and we are keenly attuned to any signs of intervention as the USD creeps back toward 160. Our focus today turns to Canadian CPI data. We expect price pressures to continue moving back toward the Bank of Canada's 1-3% target.
A softer print will likely elevate calls for a June rate cut and could weigh on the CAD. With little else on the docket, the Fed and Bank of England speakers could shape direction, yet we expect few surprises and anticipate most will stick to the message.
Expected Ranges
- NZD/USD: 0.6050 - 0.6150 ▼
- NZD/EUR: 0.5580 - 0.5650 ▼
- GBP/NZD: 2.0700 - 2.0900 ▲
- NZD/AUD: 0.9080 - 0.9180 ▼
- NZD/CAD: 0.8250 - 0.8350 ▼