NZD faces challenges in sustaining upward momentum, remaining near US$0.62
Daily Currency Update
The NZD/USD is facing challenges in extending its gains as it enters today’s early market session, hovering near the 0.6200 level. After a bullish surge that pushed the pair beyond 0.6280, momentum fizzled out, causing the currency pair to retreat into a short-term consolidation phase. Despite a widespread decline of the US dollar (USD) following a dovish shift in stance from the Federal Reserve (Fed) on Wednesday, the New Zealand dollar (NZD) has struggled to leverage the overall market sentiment. This difficulty can be attributed to disappointing New Zealand Gross Domestic Product (GDP) figures released early Thursday, which fell short of expectations.In the third quarter, New Zealand's GDP unexpectedly contracted by -0.3%, marking a significant decline compared to the previous quarter's 0.5% growth (revised down from 0.9%). This figure fell well below the anticipated 0.2%. The annualised GDP for the third quarter also experienced a downturn, registering at -0.6% instead of the expected 0.5% gain. This decline represents a setback from the previous period's 1.5% (revised down from 1.8%). The disappointing GDP results have adversely affected the New Zealand dollar (NZD), making it one of the weakest performers among major currencies, second only to the US dollar. Looking ahead, the Business NZ Purchasing Managers' Index (PMI) for November, scheduled for release in the early Friday Asia market session, is not expected to bring much optimism for NZD buyers. The NZ PMI recorded 42.5 in October.
Key Movers
The US dollar (USD) lost steam in the aftermath of the Federal Reserve's decision to maintain interest rates at 5.5%. Federal Reserve Chair Jerome Powell adopted a dovish stance, leading to a decline in Treasury bond rates as he refrained from declaring victory over inflation. Despite the Core Producer Price Index (PPI) falling below expectations at 2.0%, retail sales experienced an uptick, buoyed by the bustling Christmas shopping season. The Federal Reserve's shift towards a dovish outlook has prompted a global slump in bond yields to multi-month lows.Bank of England Governor Bailey upheld his dovish position, maintaining the status quo on all monetary policy, emphasising that UK inflation remains uncomfortably high. This sentiment contrasts with the European Central Bank's dovish stance, which, coupled with the US dollar's descent, propelled the euro to modest gains, rallying back towards the 1.1000 mark. The European Central Bank's dovish approach stands in stark contrast to that of the Federal Open Market Committee (FOMC).
Expected Ranges
- NZD/USD: 0.6085 - 0.6250 ▼
- NZD/EUR: 0.5637 - 0.5729 ▼
- GBP/NZD: 2.024 - 2.060 ▲
- NZD/AUD: 0.9265 - 0.9360 ▲
- NZD/CAD: 0.8290 - 0.8410 ▼