Home Daily Commentaries New Zealand dollar trades below 56 US cents

New Zealand dollar trades below 56 US cents

Daily Currency Update

The New Zealand dollar is weaker this morning when valued against the greenback. The Kiwi dollar broke resoundingly below a notable level of technical support around US$0.56 against the U.S. dollar early last week and by Wednesday had given up the US$0.57 handle. On Friday on the back of upbeat US jobs data the NZD/USD pair slipped below US$0.56 and closed the week just over that level. The Kiwi dollar was one of the worst performers last week that saw it trade with in a range pf 0.56-0.58 US cents. The NZD/USD pair is currently trading at US$0.5596.

Looking ahead this week on the data front and on Wednesday we will see the release of the monthly Visitor Arrivals. On Thursday Statistics New Zealand will release the Food Price Index (FPI). Although food is among the most volatile consumer price components, this indicator garners some attention because New Zealand's major inflation data is released on a quarterly basis. On Friday Business NZ will release BusinessNZ Manufacturing Index which is a survey of manufacturers which asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories.

Key Movers

On Friday in the United States, the USD Index which measures the greenback's performance against a basket of currencies climbed to the top end of its weekly range amid hawkish Federal Reserve expectations. Investors seem convinced that the US central bank will stick to its aggressive policy tightening path to tame inflation and have been pricing in another supersized 75 bps rate hike in November.

The key focus for the market on Friday was the US employment report which showed that the unemployment rate unexpectedly to 3.5% in September from 3.7% previous. Additional details revealed that the US economy added 263K new jobs during the reported month, beating consensus estimates for a reading of 250K. The data all but reaffirmed expectations with no more payrolls releases before the November FOMC meeting, the market moved to increase the chance of a 75bps hike are now almost fully priced in.

In the week ahead, the US CPI on Thursday night is the key focus, with the market seeing lower gasoline prices weighing on the headline rate (0.2% m/m expected), and core inflation remaining uncomfortably strong, at 0.4% m/m and 6.5% y/y. The US earnings season kicks off later in the week, but it’ll be off to a quiet start with the US public holiday on Tuesday and only a couple of Fed speakers on the calendar.

Expected Ranges

  • NZD/USD: 0.5500 - 0.5700 ▼
  • NZD/EUR: 0.5650 - 0.5850 ▼
  • GBP/NZD: 1.9650 - 1.9850 ▲
  • NZD/AUD: 1.1250 - 1.1450 ▼
  • NZD/CAD: 0.7550 - 0.7750 ▲