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New Zealand dollar rallies above 0.65c on risk appetite

Monday 30 May, 2022

Daily Currency Update

The New Zealand dollar closed the week stronger against the greenback which capped off a strong week by closing above 0.65c for the first time since early May. The Kiwi dollar closed the week more than 2% higher, only outdone by the oil-sensitive NOK (+2.9%), and the AUD (1.7%) not far behind. The hawkish RBNZ MPS was an added tailwind for the NZD last week. Last week New Zealand’s central bank raised interest rates by 50 basis points to 2.0% on Wednesday, its fifth rate hike in a row as it seeks to get on top of inflation and signalled the cash rate would peak at a higher level than previously forecast. Wednesday’s move by The RBNZ was the second successive 50 basis point increase in the official cash rate. The rate has now risen by 1.75 percentage points since the tightening cycle started in October. It projected that the cash rate would rise to near 4.0% in the second half of next year and would remain there until 2024. Looking ahead this week and there are no scheduled releases today in New Zealand. On Tuesday we will see the release of monthly Building Consents and ANZ Business Confidence a survey of about 1,500-2,000 businesses that asks respondents to rate the relative 12-month economic outlook.  It's a leading indicator of economic health businesses react quickly to market conditions. On Thursday we will see the release of the quarterly Overseas Trade Index.

Key Movers

Last week saw a big turnaround in risk appetite.  On the data front last week the US Department of Commerce revealed that inflationary pressures in the US are still high but lower than in March. The Core Personal Consumption Expenditure (PCE) rose by 4.9% YoY, higher than the recorded in March of 5.1%. In the same release, consumer spending increased by 0.9% in April and beat the street’s forecast as consumers boosted purchases of goods and services, a sign that could underpin US economic growth in the Q2 amid increasing worries of a recession. Looking ahead this week in the US and on Monday it is a Bank holiday closed for Memorial Day. On Thursday we will see the release of May ISM Manufacturing and the business related PMIs a survey of about 300 purchasing managers which asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories.  On Friday we will see the release of nonfarm payrolls where markets are looking for a 325k increase in jobs and a 0.1% fall in the unemployment rate to 3.5%, which would match its pre-Covid lows.

Expected Ranges

  • NZD/USD: 0.6450 - 0.6650 ▲
  • NZD/EUR: 0.5950 - 0.6150 ▲
  • GBP/NZD: 1.9250 - 1.9450 ▼
  • AUD/NZD: 1.0850 - 1.1050 ▲
  • NZD/CAD: 0.8200 - 0.8400 ▲