Home Daily Commentaries New Zealand dollar holds above 62 US cents

New Zealand dollar holds above 62 US cents

Daily Currency Update

The Kiwi dollar is slightly stronger this morning when valued against the Greenback closing the week at just over 0.6250. On Friday China PMI data were stronger than expected, particularly for the non-manufacturing sector, with a historically high figure of 58.2, reflecting a strong post-zero-COVID bounce-back in economic activity. This sent the Greenback lower and commodity currencies higher, the Kiwi dollar making a run towards, but not breaking 63 US cents. Last week the ANZ New Zealand Business Outlook for the month of March saw a mix of small rises and falls across activity indicators. Most indicators remain at very subdued levels compared to historical averages. The key themes of the March survey: Retail, construction, and agriculture respondents were generally more upbeat, while manufacturing and services firms became more pessimistic.
On the economic calendar and a very quiet week ahead in New Zealand. There are no scheduled releases today. On Tuesday New Zealand Institute of Economic Research (NZIER) will release its Business Confidence survey. A Survey of about 4,300 businesses asks respondents to rate the relative 6-month economic outlook. Economic pundits are in almost universal agreement that the Reserve Bank of New Zealand will opt for a 25 basis point hike in its monetary policy review on Wednesday. An increasing number of economists and traders think this hike could be the last, although the central bank is unlikely to signal if they share that view. Financial markets have priced in a high probability of one more increase in May, or possibly July, followed by an increased chance of a rate cut from October onwards. RBNZ has been looking for strong evidence that rates are high enough to halt inflation but knows it may not see significant movement until it has already passed that level.

Key Movers

In the United States on Friday US, economic data from the Department of Commerce revealed that the Fed’s favorite inflation gauge, the core PCE rose 4.6% YoY, beneath forecasts and a prior’s month reading of 4.7%. Headline inflation was 5%, beneath January’s 5.3%, signaling that the cumulative tightening by the Fed continues to temper inflation. The University of Michigan (UoM) showed that Consumer Sentiment on its final March reading was 62, worse than expected. At the same time, inflation expectations dropped. For the one-year horizon, the estimated inflation rate is 3.6%, while for the 5-year horizon, consumers estimate inflation to be 2.9%.
Inflation in the eurozone on Friday dropped significantly in March as energy prices continued to fall, while core expenses picked up to an all-time high. Headline inflation in the 20-member bloc came in at 6.9% in March, according to preliminary Eurostat figures released Friday. By comparison, in February, headline inflation stood at 8.5%. The main reason for this 1.6 percentage point fall was the drop in energy costs. However, other parts of the inflation basket remain stubbornly high. Food prices contributed the most to the overall inflation reading for March. Core inflation which excludes volatile energy, food, alcohol, and tobacco prices rose slightly from the previous month. It reached an all-time record of 5.7% in March, from 5.6% in February.

Expected Ranges

  • NZD/USD: 0.6150 - 0.6350 ▲
  • NZD/EUR: 0.5650 - 0.5850 ▼
  • GBP/NZD: 1.9550 - 1.9750 ▲
  • NZD/AUD: 1.0550 - 1.0750 ▲
  • NZD/CAD: 0.8350 - 0.8550 ▼