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NZD steady despite record plunge in consumer confidence

Wednesday 22 June, 2022

Daily Currency Update

The New Zealand dollar tracked sideways through trade on Tuesday unable to capitalise on an upturn in positive risk sentiment. Global rates and equities enjoyed strong gains while moves across currency markets were largely muted forcing the NZD to trade within a narrow band, bouncing between US$0.6320 and uS$0.6360. Markets showed little reaction to Westpac’s quarterly consumer confidence report wherein confidence collapsed through Q2, marking its lowest level in three decades. When paired with the ANZ’s report proffering a similar assessment, the picture painted by NZ consumers is increasingly bleak. Surging inflation and rising interest rates continue to eat into household disposable income and purchasing power, elevating risks of a recession. Our attentions turn now to domestic trade data and the UK and Canadian CPI data overnight. We anticipate inflation pressures will remain elevated, adding pressure on central banks to accelerate the pace of rate hikes.

Key Movers

Price action across major currencies was largely muted through trade on Tuesday with the exception of the Japanese yen which remains under increasing downward pressure as the Bank of Japan (BoJ) fails to keep pace with other major central banks. The USD continued its advance against the yen, climbing 1% and marking fresh 24-year highs at ¥136.45. The BoJ continues to intervene in the bond market, buying large chunks of Japanese Government Bonds in June in a bid to control its yield curve. As markets continue to test policymakers' resolve the yen continues to mark new lows. The risk now is officials will abandon the current monetary policy platform, prompting a massive JPY rally and broader market correction. Across other majors, the USD is weaker overnight as the euro crept above US$1.0550 and the pound held onto gains above US$1.2250. Our attentions turn now to UK and Canadian CPI data and testimony from Federal Reserve Chair Jerome Powell in front of a Senate panel. How he handles the inevitable grilling from lawmakers may provide some insight into Fed policy moving forward.

Expected Ranges

  • NZD/USD: 0.6220 - 0.6360 ▲
  • NZD/EUR: 0.5980 - 0.6050 ▼
  • GBP/NZD: 1.9280 - 1.9520 ▲
  • NZD/AUD: 0.9050 - 0.9150 ▼
  • NZD/CAD: 0.8150 - 0.8250 ▼