Home Daily Commentaries New Zealand dollar trades below 60 US cents

New Zealand dollar trades below 60 US cents

Daily Currency Update

The New Zealand dollar is slightly weaker this morning when valued against the greenback. The Kiwi dollar hit a fresh 2½-year low during the Friday session in London. The Kiwi was trading down to almost 0.5940 at one point. However, the turnaround in the greenback in the New York session saw these moves reverse as the NZD/USD pair rebounded to 0.5990, 0.4% higher on the day. On the week, it was the global growth-sensitive commodity currencies that underperformed. The kiwi dollar typically does not fare well during major global growth slowdowns or recessions. Last week New Zealand GDP grew 1.7% quarter-on-quarter in the second quarter of 2022 which was well above the 1.0% markets were expecting raising bets the Reserve Bank of New Zealand (RBNZ) has the scope to raise interest rates further. The strong GDP data and any rise in rate hike expectations could limit the scale of any further USD advances.

Looking ahead this week and today we will see the release of the Performance of Services Index a survey of purchasing managers which asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories. Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr is also due to deliver a speech titled "Climate Changed – and why the climate matters to RBNZ" at the Climate Change Business Conference, in Auckland. On Wednesday the RBNZ will release the monthly Credit Card Spending which looks at the change in total spending facilitated with a credit card. It's correlated with consumer spending and confidence. On Thursday we will see the release of the Westpac Consumer Sentiment and NZ Trade Balance.

Key Movers

On Friday in the United States, the University of Michigan (UoM) Consumer sentiment survey in September slightly improved but missed estimations of 60.0. The Consumer Sentiment rose by 59.5 vs. 58.6 in the prior month, while inflation expectations in a 1-year horizon slumped to 4.6% from 4.8% in August. The week ahead is likely to be dominated by a trifecta of major central bank meetings the US Federal Reserve, Bank of England, and Bank of Japan (BoJ) all meeting on Thursday. Even though inflation expectations are lower, market participants have fully priced in a Fed’s 75 bps rate hike in the September meeting. Everything points to another 75 basis-point rate hike by the Fed taking the cash rate to 3.25%. The likelihood that it will have to go ‘big’ again in November is elevated, too. The Bank of Japan will also meet on Thursday amidst the recent sharp fall in the JPY which has seen speculation mount that the Ministry of Finance could intervene in the currency market or the BoJ amend its Yield Curve Control policy to allow for a more upward adjustment in Japan bond rates. The Bank of England’s rescheduled meeting (delayed for a week due to the Queen’s passing) is more uncertain, with most economists looking for a 50bps hike but the market slightly leaning towards a 75bps move.

Equity markets were weaker again on Friday, not helped by a bleak earnings update from US package delivery company FedEx. FedEx shocked the market with much weaker earnings ($3.44 vs. $5.10 expected) and withdrew its full-year guidance, blaming worsening “macroeconomic trends. The S&P500 was lower by 0.7% on Friday, having been down as much as 1.6% at one point, while the EuroStoxx 600 index was down 1.6% on Friday.

Expected Ranges

  • NZD/USD: 0.5900 - 0.6100 ▼
  • NZD/EUR: 0.5900 - 0.6100 ▼
  • GBP/NZD: 1.8900 - 1.9100 ▲
  • NZD/AUD: 1.1100 - 1.1300 ▼
  • NZD/CAD: 0.7850 - 0.8050 ▼