Home Daily Commentaries New Zealand dollar moves back below 59 US cents

New Zealand dollar moves back below 59 US cents

Thursday 3 November, 2022

Daily Currency Update

The New Zealand dollar is slightly weaker this morning when valued against the greenback. Earlier in the session the USD showed broadly based losses, with the Kiwi dollar breaking back up through US$0.59, spiking as high as US$0.5940 before Federal Reserve’s Chair Powell’s hawkish comments sent it back just below US$0.59. The NZD/USD pair is currently trading at US$0.5823 at the time of writing. On the data front yesterday NZ labour market data indicated a still very tight labour market, with a strong 1.3% q/q rebound in employment in Q3 following three flat quarters, but the unemployment rate remaining steady at 3.3% as labour force participation surged. Wage inflation remained hot, with the LCI measure of private sector wages excluding overtime rising a record 3.8% y/y (in data dating back thirty years), with 2% on this measure being consistent with CPI inflation being at the mid-point of the target range. RBNZ Deputy Governor Hawkesby noted that the labour market data were broadly in line with the Bank’s expectations. Looking ahead today in New Zealand and we will see Australia and New Zealand Banking Group (ANZ) release the Commodity Price Index which looks at the average price of the nation's main commodity exports sampled on the global market and then compared to the previous sampling. Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr is due to testify about the Financial Stability Report before the Finance & Select Expenditure committee, in Wellington today. As head of the central bank, which controls short-term interest rates, he has more influence over the nation's currency value than any other person.

Key Movers

The main focus overnight has been on the Fed’s 75bps hike this morning, with a notable dovish pivot in the FOMC statement. This supported US equities, drove US Treasury yields lower and the USD lower. As we go to print, Chair Powell conveyed a hawkish message and some of that initial move has faded. As widely expected, the Fed raised the Fed Funds target range by 75bps to 3.75-4.0%. Of most interest to the market, the Fed included forward guidance that “in determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments”. Looking ahead today and the key event is the Bank of England’s policy update, where almost all economists are picking a 75bps hike in Bank Rate to 3.0% and this is fully priced. There will be more interest in how much higher the Bank is prepared to take rates, ahead of the pending economic recession and fiscal austerity. The key economic release is the US ISM services index, where the consensus sees some slippage to 55.3.

Expected Ranges

  • NZD/USD: 0.5700 - 0.5900 ▼
  • NZD/EUR: 0.5800 - 0.6000 ▼
  • GBP/NZD: 1.9450 - 1.9650 ▲
  • NZD/AUD: 1.0800 - 1.1000 ▲
  • NZD/CAD: 0.7900 - 0.8100 ▼