New Zealand dollar trades below US$0.62
Monday 24 April, 2023
Daily Currency UpdateThe Kiwi dollar is weaker this morning when valued against the Greenback. On Friday commodity currencies added to their weakness during the NZ trading session and were notable underperformers. The Kiwi dollar closed the week around 0.6160, taking its fall for the week to just over 1% and down on most of the crosses by a similar amount, a reflection of the big downside miss for the Consumer Price Index (CPI) earlier in the week. Inflation in New Zealand slowed more than expected in the first quarter, bolstering the case that global price pressures have peaked and central banks are nearing the end of their tightening cycles. Annual headline inflation fell to 6.7% in the March quarter, from 7.2% in October-December, Statistics New Zealand said on Thursday. The reading beat economists’ expectations of 6.9% and the Reserve Bank of New Zealand’s forecast of 7.3%. While the softer result may not be enough to prevent the RBNZ from raising the cash rate at next month’s meeting, it should allow the central bank to reduce the size of its next interest rate increase.
On the economic calendar and a very quiet week ahead in New Zealand. On Wednesday Statistics New Zealand will release the monthly Trade figures, while the Reserve Bank of New Zealand will release the monthly Credit Card Spending figures which is correlated with consumer spending and confidence. Rising debt levels are a sign that lenders feel comfortable issuing loans, and that consumers are confident in their financial position and eager to spend money. On Thursday we will see the release of the ANZ Business Confidence, a survey of about 1,500-2,000 businesses, which asks respondents to rate the relative 12-month economic outlook. Due to Anzac Day public holiday tomorrow there will be no commentary.
Key MoversOn Friday strong global PMI data reinforced market views of further policy tightening ahead for the Fed, ECB and BoE, pushing global rates modestly higher. The 2 year yield moved from down about 5 or so basis points to up 1.8 basis points, currently at 4.183%. The 10 year yield is now up 2.1 basis points at 3.566%. Stocks have moved lower with the NASDAQ index down -0.5% and the S&P index down by -0.21%. The Dow industrial average’s down -0.09%. With Fed officials still talking up inflation, stronger data is not the soft landing they are looking for to slow the inflation levels. The market is pricing in a 90% chance of a hike in two weeks and is now pricing in a small chance of another one on June 14. The market has been struggling with the potential for a hard landing recently due to the Fed staying overly tight, but market participants will also have to weigh the chance of the economy breezing through 5% rates.
The British pound’s rally against the Greenback has stalled recently, and chances are that the consolidation could continue a while longer before it embarks on a new leg higher. Last week UK core inflation failed to fall as expected last month, holding steady at 6.2% on-year, and surpassing estimates of 6.0%, while UK wage growth surprised on the upside in February. Headline inflation rose faster than expected at 10.1% on-year in February vs the 9.8% expected, and not too far from the four-decade high of 11.1% hit in October. Investors are now fully pricing in a 25-basis point rate hike to 4.25% on May 11 and expect rates to peak at 5% by September. GBP/USD is trading at 1.2439 after printing a low at 1.2367, below the 20-day Exponential Moving Average (EMA). If GBP/USD breaks above 1.2400, it could test the April 19 cycle high at 1.2474, followed by the YTD high at 1.2546.
- NZD/USD: 0.6050 - 0.6250 ▼
- NZD/EUR: 0.5500 - 0.5700 ▼
- GBP/NZD: 2.0150 - 2.0350 ▲
- NZD/AUD: 1.0800 - 1.1000 ▼
- NZD/CAD: 0.8200 - 0.8400 ▼