Home Daily Commentaries NZD rallies as US and European activity data falls short of expectations

NZD rallies as US and European activity data falls short of expectations

Daily Currency Update

The New Zealand dollar rallied through trade on Wednesday, buoyed by weaker global PMI data. Both US and European PMI surveys measured below market expectations and point to a larger than anticipated contraction in global economic activity. Bond yields retreated in response to the weaker print, while equities and risk assets found support as markets pared back expectations for tighter monetary policy. Having drifted toward intraday lows at US$0.5925 the NZD then rallied, climbing through US$0.5950 and marking intraday highs at US$0.5985. Having seemingly found support above US$0.59 for now attentions turn to US jobless claims and good orders on an otherwise quiet macroeconomic ticket while China headlines continue to dominate the broader risk narrative.

Key Movers

Treasury yields dipped through trade on Wednesday, after PMI data raised fears the global growth outlook is softening. European PMI data measured well below expectations, led by falls in Germany and France as German manufacturing activity retreated for a seventh consecutive month. As interest rates continue to rise, consumer sentiment is faltering, weakening demand and forcing investors to correct expectations for future central bank policy adjustments. Analysts pared back European Central Bank (ECB) rate hike prospects pricing in just an 8-basis point adjustment, down from 14, where it started the week. The Euro fell through 1.0850 marking intraday lows marginally above 1.08 before US yields followed European rates lower, forcing the USD to give up early gains. The Euro rebounded and the Yen outperformed while the GBP continued to bounce within a narrow trading handle.

Attentions turn now to US jobless claims. We expect little shift against last week’s print while goods orders offer an insight into future US activity.

Expected Ranges

  • NZD/USD: 0.5890 - 0.6030 ▲
  • NZD/EUR: 0.5450 - 0.5550 ▲
  • GBP/NZD: 2.1100 - 2.15 ▼
  • NZD/AUD: 0.9180 - 0.9300 ▼
  • NZD/CAD: 0.8020 - 0.8120 ▲