NZD holds firm ahead of key central bank and inflation updates
Daily Currency Update
The New Zealand dollar tracked within a relatively narrow range to start the week amid a lack of headline data. The NZD was little changed when measured against last week's close, largely shrugging off a disappointing China inflation update and instead tracking between US$0.6105 and US$0.6120.Markets appeared content in sidelining majors bets ahead of a string of key major risk events this week. The Fed, ECB and Bank of England all provide monetary policy updates while US inflation data dominates the docket through trade on Tuesday.
With the market still incredibly sensitive to any data set that might disrupt the current FOMC narrative, an outsized inflation read could drive an outsized market reaction and prompt volatility leading into the Fed/FOMC monetary policy decision. While maintaining a narrow handle against the USD, the NZD is stronger against both the AUD and JPY and flat against the euro and GBP.
Key Movers
It has been a relatively quiet start to the week with little headline data on hand to spur direction. Instead, attention was captured by comments from BoJ officials who pushed back against calls to move off the bank's negative interest rate platform. Reports suggest while the BoJ is considering a move away from negative rates, it sees little need to rush into making such a move as wage growth and inflation remain at sustainable levels.The report quashed market hopes of a December policy change and allowed the USD to lurch back above 146, marking highs above 146.50. With the yen under pressure, US yields rose and the dollar enjoyed some upside with both the euro and GBP trading flat for the day.
Our attention turns now to US CPI inflation data. With last week's robust payroll update, an outsized inflation read will prompt more volatility leading into the Fed policy update. While we expect the Fed will leave rates on hold, a strong read could disrupt market calls for the Fed to call an end to the tightening cycle and begin cutting rates as early as May 2024.
Expected Ranges
- NZD/USD: 0.6080 - 0.6220 ▼
- NZD/EUR: 0.5650 - 0.5750 ▲
- GBP/NZD: 2.0400 - 2.0600 ▲
- NZD/AUD: 0.9280 - 0.9380 ▲
- NZD/CAD: 0.8280 - 0.8350 ▼