NZD steady ahead of RBNZ policy update
Wednesday 5 April, 2023
Daily Currency UpdateThe New Zealand dollar offered little through trade on Tuesday, trading sideways through much of the domestic session before creeping higher overnight following softer than anticipated US Jolts jobs data. New Job openings plunged through February, while January’s figure was revised lower forcing investors to revisit expectations for Fed policy. Having touched intraday lows at US$0.6275 the NZD now sits back above US$0.63 as our attentions turn to the RBNZ and the April monetary policy statement. With inflation conditions and domestic demand finally beginning to trend in the right direction the RBNZ can take some comfort that the current program of tightening financial conditions is working. A 25-basis point hike and OCR is fully priced in with a smaller outsized chance of a 50-point hike still on the table. We expect policy makers will maintain their tightening bias for now helping lift the NZD against key counterparts. With the NZD weaker against the euro and GBP another rate hike could help lift yield play demand while helping extend gains against the AUD. Having tracked back toward AU$0.9350 a move toward AU$0.94 is possible as the yield advantage continues to favour the NZD.
Key MoversUS Jobs data was the major market mover through trade on Tuesday with JOLTS job openings plunging through February. The JOLTS report showed new job openings plummeted, down 632,000 in February, while January’s figure was revised lower to mark a significant miss when values against expectations. With the unemployment rate creeping higher and the quit rate falling labour market conditions are clearly easing at a faster pace than first anticipated. When coupled with Monday’s lower-than-anticipated ISM manufacturing update investors have been forced to revise expectations for fed policy. US treasury rates fell as markets are now split 50/50 on whether the Fed will hike at its next meeting in May. With the USD falling in the wake of the report the euro, GBP and JPY all gained.
Our attentions turn now to key commentary from Fed member Mester ahead of Friday’s all-important Non-farm payroll print. With average estimates pointing to a moderation in jobs growth anything short of 240K will likely amplify calls for the Fed to pause its tightening cycle and force the USD lower, while a shock uptick will afford policy makers the fodder to keep the foot on the accelerator.
- NZD/USD: 0.6220 - 0.6350 ▲
- NZD/EUR: 0.5720 - 0.5820 ▼
- GBP/NZD: 1.9620 - 1.9880 ▲
- NZD/AUD: 0.9250 - 0.9380 ▲
- NZD/CAD: 0.8400 - 0.8550 ▲