NZD crashes as US inflation remains stubbornly sticky
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Daily Currency Update
The New Zealand dollar was among the weakest of the major currencies through trade on Wednesday, tumbling back below US$ 0.60 amid a stronger-than-expected US inflation report. Markets largely ignored the RBNZ policy meeting after it elected to leave rates on hold at 5.5% and offered a statement that was little changed from the February outlook. Policymakers remain committed to returning inflation to target in 2024 and are confident that maintaining the current OCR for a sustained period will achieve that. The NZD tracked between US$0.6050 and US$0.6080 through the domestic session, leading into the all-important CPI print. With inflation data for March missing to the upside, the NZD tumbled as the USD rallied. The NZD gave up over 1.5% touching lows at US$0.5970 before finding support. As one of the day's big underperformers, the NZD is lower against all crosses excluding the AUD and our attentions now turn to China CPI and PPI data for March for direction through the Australasian session, while US PPI data and the ECB policy meeting dominate the overnight docket.Key Movers
The US dollar outperformed all counterparts through trade on Wednesday after US CPI data for March surprised to the upside. Markets expected a 0.3% uptick in price pressures to close out the first quarter with bets on a miss skewed to the downside and a 0.2% read. Instead, a 0.4% uptick ensured the annual rate of inflation held steady at the February level of 3.8%, instead of falling to 3.7% as expected. US treasuries leapt across the curve, while equity markets faltered and the USD DXY index rallied 1%. The Euro slipped back below 1.08 and 1.0750, while the GBP crashed through 1.27 and 1.26. The Japanese yen gave up 152 and is now firmly entrenched within interventionist territory. Given the move has been inspired by the run-up in US yields and not domestic drivers, it will be interesting to see if the MOF and BoJ intervene or let the rally run its course. Either way USDJPY volatility at these levels is to be expected.Our attentions now turn to US PPI data and the ECB policy meeting. We expect the ECB will leave rates on hold at 4.5% shifting our attention to the post-meeting statement and press conference for any signal the governing council is moving toward a June rate cut.
Expected Ranges
- NZD/USD: 0.5920 - 0.6080 ▼
- NZD/EUR: 0.5500 - 0.5600 ▼
- GBP/NZD: 2.0800 - 2.1000 ▲
- NZD/AUD: 0.9120 - 0.9220 ▲
- NZD/CAD: 0.8150 - 0.8250 ▼