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Kiwi above 64 US cents – RBNZ in focus this week

Monday 23 May, 2022

Daily Currency Update

The New Zealand dollar closed on Friday above 64 US cents following a recovery from two year lows the previous week. Opening at 0.6378, the NZD/USD saw little movement following a positive trade balance print with eventual moves higher to 0.6403 supported by a weaker greenback and easing in China of current lockdown measures. Following the Annual Budget Release on Thursday whereby it is expected the local economy will narrowly miss recession, all eyes turn to the RBNZ this week as they try to curb ballooning inflation which is expected to reduce to 5.2% by June 2023. It is widely expected that the Reserve Bank of New Zealand on Wednesday will hike another 50-basis points to bring the official cash rate to 2.00%. The New Zealand dollar opens this morning at 0.6397. We expect support levels to hold onto moves approaching 0.6360 while any upward push will likely meet resistance at 0.6440.

Key Movers

The US dollar snapped its six-week run of moves higher last week closing at 103.02 after reaching a record high of 105.01 on Friday the 13th. Volatility moved higher on the day seeing a 0.3% rise on the VIX as technology stocks pushed the Nasdaq lower by 0.3% to 11,354 and saw its seventh straight week of declines. Shanghai reopened a small part of its subway system on the weekend which has been closed for two months. With residents still not allowed to leave homes it is hoping an easing of restrictions by June will shift risk sentiment in the markets and boost the local economy. Elsewhere a boost in retail sales in the UK supported the Great British pound as volumes rose by 1.4% in April following a fall in March of 1.2%. The GBP/USD cross saw a 0.2% rise on the day to 1.2191. EUR/USD was 0.2% lower to close the week at 1.0560 and the USD/JPY steady at 1.2790. This week a similar story around curbing inflation will be firmly on the agenda of global central banks. This week’s focus is centralised on the RBNZ where markets are pricing cash rates at 3% by year-end.

Expected Ranges

  • NZD/USD: 0.6360 - 0.6440 ▲
  • NZD/EUR: 0.6020 - 0.6100 ▲
  • GBP/NZD: 1.9300 - 1.9700 ▼
  • NZD/AUD: 0.9030 - 0.9120 ▲
  • NZD/CAD: 0.8170 - 0.8240 ▲