Home Daily Commentaries Kiwi plumbs new lows as China worries mount and local data disappoints

Kiwi plumbs new lows as China worries mount and local data disappoints

Daily Currency Update

The New Zealand dollar retreated through trade on Friday, breaking key supports and marking fresh 2023 lows. Stronger than anticipated US PPI data propelled the NZD below US$0.60 and toward US$0.5980, a new low for the year. While the move is aligned with stronger US data, weak domestic macroeconomic performance and ongoing concerns surrounding the Chinese economic outlook compounded moves and afforded investors scope to consolidate the recent downturn. Weaker than expected manufacturing activity data headlined the domestic macro ticket Friday with PMI data falling to its lowest level in nearly 24 months, while food prices fell half a percent easing concerns Q3 would print above market expectations, lead by rising fuel prices, forcing the RBNZ to rethink its pause in rate hikes. Having broken psychological supports against the USD the NZD is also lower against key major counterparts, sliding toward A$0.9210 while marking new 3 year lows against the GBP and struggling against the Euro.
Our attention turns now to Chinese Industrial Production data Tuesday ahead of Wednesday's all-important RBNZ policy update.

Key Movers

The US dollar advanced against most counterparts Friday, buoyed by a stronger than anticipated US PPI report. Data for July showed producer price pressures increased 0.3%, a tenth of a percent faster than anticipated, meaning annual inflation remained steady at 2.4%. Analysis suggests the increase in producer costs has been driven by the services sector with labour costs and input goods costs flat across the month. With US consumer sentiment stable the uptick in leading inflation data helped propel US yields upward, dragging the US dollar higher across the board. The Euro slipped below 1.10, while the Yen broke key Psychological supports at 145 and now sits just below the June high. Ongoing and sustained JPY weakness will likely invoke action from Japanese policy makers. Officials have shown a penchant for intervention at these levels and skirmishes designed to support the beleaguered Yen will hardly surprise market participants. With most majors struggling against the stronger dollar backdrop the GBP outperformed. UK yields rallied following stronger than anticipated Q2 GDP data. An uptick in quarterly GDP growth lifted expectations for the terminal Bank of England base rate, suggesting policy makers will lift rates by a further 50 basis points across two more rate hikes. The promise of higher yields and easing growth concerns helped drive GDP gains across the board with Stirling making new three year highs against the AUD and NZD.

Expected Ranges

  • NZD/USD: 0.5950 - 0.6050 ▼
  • NZD/EUR: 0.5420 - 0.5520 ▼
  • GBP/NZD: 2.0980 - 2.1420 ▲
  • NZD/AUD: 0.9180 - 0.9280 ▼
  • NZD/CAD: 0.8000 - 0.8100 ▼