NZD lurches higher as US economic outlook weakens
Friday 14 April, 2023
Daily Currency UpdateThe New Zealand dollar surged higher through trade on Thursday, crashing back through US$0.6250 and US$0.63 amid an improved risk backdrop. The NZD, in partnership with the AUD, out performed major counterparts as demand for risk improved following weaker than anticipated US inflation input markers and rising unemployment claims. PPI data was weaker than anticipated offering a clear signal that service sector inflation is softening and giving hope core CPI inflation may weaken in the near term. With jobless claims rising at a faster than anticipated pace, markets looked to support a growing narrative that suggests the Fed tightening cycle is nearly over. Having touched intraday highs at US$0.6320 the NZD opens this morning just short of US$0.63 buying US$0.6294. While domestic pressures continue to cloud the local economic outlook a growing theme of US weakness and an end to Fed tightening will help support a longer run NZD recovery. Our attentions turn now to US retail sales and consumer sentiment. A softening across consumer metrics will play to emerging themes and could provide the catalyst to consolidate a break above US$0.63.
Key MoversThe US dollar came under increasing pressure through trade on Thursday as weaker than anticipated PPI inflation data and increasing jobless claims played to a narrative of growing US economic weakness and a potential end in the Fed’s monetary policy tightening cycle. Markets are still pricing in a modest chance of a 25 point hike in May, but are now anticipating this will be the last and final rate adjustment within this tightening cycle. With expectations for a pause in Fed policy amplified the US dollar and US yields have tracked firmly lower with the dollar on track for its fifth consecutive weekly decline. Against this backdrop the euro has traded to 12 month highs pushing through 1.1050, while the GBP has risen to 10 month highs above 1.25. The yen was the day’s under performer unable to capitalise on USD weakness. Improved risk sentiment and the burgeoning gap between Bank of Japan and dollar bloc central bank monetary policy continues to weigh on the yen, prompting a sharp decline against key crosses, namely the AUD and NZD.
Our attentions turn now to US retail sales data and any signs of continuation in the recent narrative of US economic weakness.
- NZD/USD: 0.6180 - 0.6350 ▲
- NZD/EUR: 0.5620 - 0.5750 ▲
- GBP/NZD: 1.9720 - 2.0130 ▼
- NZD/AUD: 0.9220 - 0.9320 ▲
- NZD/CAD: 0.8320 - 0.8450 ▲