NZD outperforms as USD eyes break below key supports
Tuesday 9 May, 2023
Daily Currency UpdateThe New Zealand dollar outperformed all major counterparts through trade on Monday, consolidating a break above US$0.63 to touch US$0.6350. With little domestic data on hand to drive direction and a quiet international macroeconomic docket, the NZD was at the mercy of wider market forces, buoyed by a broadly weaker US dollar.
Fallout from last week’s mixed US non-farm payroll print and rising concerns surrounding the looming US debt ceiling weighed on the world's base currency and allowed the NZD room to stretch its legs and push off recent lows. NZD gains extending across major counterparts, pushing above AU$0.9355 while advancing near 1% against the euro, British pound and Japanese yen.
After a tumultuous and packed agenda last week, this week’s docket is considerably lighter with US CPI and Bank of England policy announcements dominating direction. Further easing in US inflation pressures will likely elevate calls for the Fed to pause its tightening cycle, possibly opening the door for the NZD to climb and consolidate a break above resistance at US$0.6380 and test a run above US$0.64.
Key MoversThe US dollar underperformed through trade on Monday, trading toward the bottom of recent ranges, when valued against a basket of key counterparts. The USD DXY index hit lows marginally above 101 at 101.30 and is now within striking distance of key supports and April lows of 100.80. A break below this handle could signal a broader shift in market flow and set up further downward pressure.
The weaker USD helped the euro, JPY, CAD and GBP all enjoy modest gains throughout the day and our attention turns now to US CPI data. With the week’s macroeconomic docket lighter than usual, this latest inflation update could prove pivotal in shaping direction. Calls for the Fed to pause it's tightening cycle amid a looming credit crunch and tighter financial conditions have grown in recent weeks.
Further softening in inflation pressures will likely add more weight behind such calls, with markets eyeing an end to this tightening cycle, weaker inflation could be the catalyst to drive the USD through supports.
- NZD/USD: 0.6220 - 0.6420 ▲
- NZD/EUR: 0.5620 - 0.5820 ▲
- GBP/NZD: 1.9780 - 2.0220 ▼
- NZD/AUD: 0.9280 - 0.9420 ▲
- NZD/CAD: 0.8380 - 0.8550 ▲