NZD unable to sustain post US payroll gains as risk aversion elevated
Daily Currency Update
After wearing heavy losses through the start of last week the NZD found some support through trade on Friday amid softer than anticipated US non-farm payroll data. Having given up nearly 1% on the week the NZD bounced off lows at US$0.6070, punching back through US$0.61 and marking overnight highs at US$.6128 after US non-farm payroll data printed lower than expected. Headline job growth increased by 187,000 in July, short of expectations and when coupled with a downward revision on June and May numbers dragged the 4-month average lower. With the NZD seemingly poised to solidify the recovery into the weekly close, it began giving back gains sliding back below US$0.61 and tracking sideways into the close. The NZD opens this morning buying US$0.6088 as our attention turns to Wednesday's Chinese CPPI inflation update, the first major item on the weekly macro agenda. The Chinese Economic slowdown remains a significant headwind capping NZD upside and another deflationary print will likely exacerbate Yuan weakness and weigh on the NZD.Key Movers
US non-farm payroll data dominated the docket Friday, prompting ample price action across treasuries, equities and currency markets. A softer than anticipated uptick in headline payroll growth and a downward revision in May and June numbers prompted an immediate correction in US treasuries with 2-year rates slumping some 12 basis points. Equities and bond yields remained under pressure as Growth worries in Europe and China and the downgrade in Fitch’s US credit rating continue to weigh on investors' appetite for risk, and while the DXY index gave up half a percent on the day, the undercurrent of risk aversion helped minimise losses and ensured the USD would close higher on the week.The Euro pushed back above 1.10 while the Yen enjoyed some relief as US treasury yields retreated. While pushing back above 1.27 the GBP was unable to make any really meaningful gains sliding back below 1.2750 leading into the weekly close.
With investors still pricing in only a 20% chance of a September Fed rate hike our attentions turn this week to Chinese CPI data and US Core PPI numbers. With the promise of stimulus thus far unfulfilled by Chinese officials another deflationary print could well spur further Yuan weakness and exacerbate the recent risk off move.
Expected Ranges
- NZD/USD: 0.6050 - 0.6130 ▲
- NZD/EUR: 0.5480 - 0.5580 ▼
- GBP/NZD: 2.0620 - 2.1180 ▲
- NZD/AUD: 0.9220 - 0.9320 ▼
- NZD/CAD: 0.8080 - 0.8220 ▲