Home Daily Commentaries New Zealand dollar continues to hold above US$0.64

New Zealand dollar continues to hold above US$0.64

Thursday 15 December, 2022

Daily Currency Update

The New Zealand dollar is stronger this morning when valued against the US dollar. The New Zealand dollar consolidated overnight after the US Federal Reserve (Fed) monetary policy decision, with Jerome Powell raising rates by 50 basis points, trading in a tight range around US$0.6450. US dollar weakness remains the key theme in the FX market, although currency movements have been relatively restrained overnight. Recent moves saw the New Zealand dollar rebound as market risk appetite improved. Beijing’s move to start easing COVID restrictions helped to cheer investors on hopes China’s reopening could provide a shot in the arm for global growth. The NZD/USD pair is currently trading at US$0.6447. On the local front, yesterday, New Zealand’s Treasury joined the country’s central bank to predict a shallow recession in late 2023 after the release of the Half Yearly Economic and Fiscal Update (HYEFU), which painted a similar gloomy story for the New Zealand economy to the Reserve Bank earlier this month. New Zealand has fared well through COVID-19, with GDP growing 6.8 per cent above pre-pandemic levels. However, a slowdown is a forecast for next year as the NZ Treasury secretary Caralee McLiesh predicts an 0.8 per cent contraction. New Zealand House prices are set to fall 20 per cent from their December 2021 peak to a trough in December 2023 and not recover lost ground until December 2026. Joblessness is set to rise from its current low of 3.3 per cent to 5.5 per cent in two years. An election is expected in late 2023.

Key Movers

Overnight the Federal Reserve Open Market Committee (FOMC) made the widely anticipated decision to raise the Federal Funds rate (FFR) toward 4.25-4.50%. A tight labour market and inflation spurred the US central bank’s decision. According to the Summary of Economic Projections, Federal officials predict a “terminal” rate average near 5.10%, with GDP anticipations at 0.5% for both 2022 and 2023; inflation is expected to reach 3.5% by 2023 before declining further in future years down toward the 2% US central bank, target. As measured by the DXY index, the US Dollar is high by 0.11% at the time of writing, making fresh gains on Powell’s hawkish remarks. US Treasury yields have also rallied, with the 10-year Treasury yield now printing a high of 3.56% on the day from 3.46% the low. In the UK, we saw the release of the Office for National Statistics (ONS) in the United Kingdom (UK) witnessed inflation easing in November, from 11.1% to 10.7% YoY, and beneath estimates of 10.9%. The core Consumer Price Index (CPI) dropped from 6.5% to 6.3% YoY, remaining three times higher than the Bank of England’s goal. In the meantime, the Bank of England will reveal its monetary policy decision on Thursday, with most analysts expecting a 50 basis points rate increase which would take the Bank Rate to 3.5%.

Expected Ranges

  • NZD/USD: 0.6350 - 0.6550 ▲
  • NZD/EUR: 0.5950 - 0.6150 ▲
  • GBP/NZD: 1.9150 - 1.9350 ▲
  • NZD/AUD: 1.0550 - 1.0750 ▼
  • NZD/CAD: 0.8650 - 0.8850 ▲