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NZD consolidate break above 0.65 as focus shifts to growth.

Tuesday 31 May, 2022

Daily Currency Update

The New Zealand dollar outperformed through trade on Monday enjoying an extension in last weeks risk on narrative. Improved sentiment helped key equity indices recover recent losses and unwind a move into oversold territory while improved Covid news from China helped elevate demand for key commodities. The New Zealand dollar extended Friday’s gains through the domestic session as reports China recorded its lowest daily Covid case count in 3 months fueled hopes lockdowns will soon ease. Oil prices led gains across key commodities up 2% on expectations of increased demand from China. Having consolidated its break above 0.65 US cents the NZD touched intraday highs at 0.6560 and opens this morning buying 0.6550 US cents. With the USD under pressure and market focus pivoting away from inflation pressures toward growth concerns there is scope to suggest the NZD could continue its recent recovery. Signs the US economic recovery is slowing, coupled with a shift in expectations surrounding Fed policy have helped lift the Kiwi off recent lows. Assuming this is not just another false USD downturn opens the door to a push back toward 0.66, 0.67 and possibly even 0.68 US cents.

Key Movers

Despite the Memorial Day Public Holiday in the US there was plenty of price action across major currencies as the US extended last week downward correction on the heels of a sustained risk on move and an upside shock in German inflation pressures. Markets retained last week’s risk sentiment as China continues to report improved COVID case number and hopes a reduction in lockdowns will ease pressures on the global supply chain elevated commodity prices and investors confidence. The USD edged lower through the Asian session before shifting sharply downward following a surprise German inflation print. Germany’s CPI index surged 1.1% in May more than half a percent above expectations. The upside surprise forced the annual inflation rate to 8.7%, a multi decade high, and heaps more pressure on the ECB to raise rates out of negative territory at its policy meeting next week. With markets moving to price in 100 basis point hike in the underlying Euro cash rate before years end and ECB officials signaling at least two rate adjustments Euro rates surged and the Euro rallied to touch intraday highs at 1.0785. The move in European and global rates forced the JPY lower against its major counterparts with the Yen the worst performer on the day. Our attentions turn now to broader Euro Area CPI and US Consumer confidence data for direction through trade on Tuesday.

Expected Ranges

  • NZD/USD: 0.6480 - 0.6620 ▲
  • NZD/EUR: 0.6020 - 0.6120 ▼
  • GBP/NZD: 1.9220 - 1.9380 ▼
  • NZD/AUD: 0.9080 - 0.9150 ▼
  • NZD/CAD: 0.8230 - 0.8330 ▼