Home Daily Commentaries New Zealand dollar trades below 62 US cents

New Zealand dollar trades below 62 US cents

Daily Currency Update

The Kiwi dollar is weaker this morning when valued against the Greenback. The NZD/USD pair comes under renewed selling pressure on Friday amid the ongoing USD recovery. The risk-off vibe drove the Kiwi dollar back below 0.62 but it found some support just under that mark and ended the week near62 US cents. The US Dollar (USD) is gaining positive traction for the second straight day on Friday and recovering further from a seven-week low touched the previous day, which, in turn, is seen weighing on the NZD/USD pair. As investors digest the Federal Reserve's less hawkish outlook, a fresh leg down in the equity markets drives some haven flow towards the Greenback and exerts pressure on the risk-sensitive Kiwi. It is worth recalling that the US central bank, as was widely anticipated, raised interest rates by 25 bps on Wednesday, though sounded cautious in the wake of the recent turmoil in the banking sector. Furthermore, the Fed lowered its median forecast for real GDP growth projections for 2023 and 2024. This leads to a further decline in the US Treasury bond yields and should act as a headwind for the Greenback.
On the economic calendar and a very quiet week ahead in New Zealand. There are no scheduled releases today. On Thursday Statistics New Zealand will release the monthly Building Consents. It's a leading gauge of future construction activity because obtaining government approval is among the first steps in constructing a new building. On Thursday we will also see the release of the ANZ Business Confidence survey of about 1,500-2,000 businesses which asks respondents to rate the relative 12-month economic outlook. It's a leading indicator of economic health businesses react quickly to market conditions, and changes in their sentiment can be an early signal of future economic activity such as spending, hiring, and investment.

Key Movers

Deutsche Bank came under significant selling pressure on Friday night, with hedge funds seeing that bank as the next possible European banking casualty. The stock price was down almost 15% early in the trading session, which prompted a flurry of comments. Although this harmed Wall Street at the beginning of the session, investors appeared to dismiss these fears and instead speculated that the Federal Reserve (Fed) would lower interest rates in 2023. Federal Reserve officials crossed wires in the session. St. Louis Fed President James Bullard noted that rates need to get to the 5.50%-5.75% range, which would require an additional 75 bps of rate hikes after the Fed’s raised rates to the 4.75%-5.00%. On the data front, the US economic calendar featured the S&P Global PMI improved in March, exceeding expectations and the prior’s month data. The Manufacturing Index stood in the contractionary territory. At the same time, Durable Good Orders plunged by 1% but improved compared to the last month’s reading. In the week ahead, we’ll hear more from Fed speakers following the FOMC meeting last week. The president of the Federal Reserve Bank of Minneapolis Neel Kashkari reinforced on Sunday that the banking system is “sound.” Kashkari’s comments come after weeks of turmoil in the banking industry, as Signature Bank and Silicon Valley Bank collapsed earlier this month and First Republic Bank needed to be bailed out by a group of other banks. These incidents have sparked market concerns about whether a larger banking crisis is imminent.

Expected Ranges

  • NZD/USD: 0.6050 - 0.6250 ▼
  • NZD/EUR: 0.5600 - 0.5800 ▼
  • GBP/NZD: 1.9559 - 1.9750 ▲
  • NZD/AUD: 1.0550 - 1.0750 ▲
  • NZD/CAD: 0.8400 - 0.8600 ▼