Home Daily Commentaries NZD stumbles ahead of CPI report

NZD stumbles ahead of CPI report

Daily Currency Update

The New Zealand dollar is markedly weaker this morning as markets retrace last week's gains ahead of today's all-important CPI report. Having tracked sideways through the domestic session the NZD trended lower overnight for no other reason other than a broad USD rebound and positioning ahead of Q2 CPI data. Markets anticipate a softer print this morning, allowing the RBNZ greater scope in calling an end to this tightening cycle. Having slipped back below US$0.63 the NZD found support at US$0.6260 and has crept back toward US$0.6280 leading into this morning's open.
Our attention is affixed to Q2 CPI data, with consensus expectations anticipating a 0.9% quarter-on-quarter increase and a 5.9% year-on-year uptick. Any read near these levels should reinforce the narrative that underlying inflation is moving lower. With the RBNZ expected to leave rates on hold near term NZD softness may emerge.

Key Movers

The NZD has been the big mover on the day while the USD is broadly stronger retracing some of last week's downturn and pushing back against the euro, GBP and JPY. All are modestly weaker and the DXY Index is up 0.1%. US retail sales were mixed for June as the headline figure printed softer than anticipated yet on closer inspection so an upward revision in historical prints and a stronger rise in core sales, a better marker of ongoing GDP performance. In short, the data pointed to a 1% rise in consumer spending through the quarter, well down on the 4% surge enjoyed in Q1 but still expansionary. The print has cemented expectations for a 25-point rate hike next week.
European rates and the euro fell after a dovish statement from European Central Bank (ECB) member Knot. Knot, typically one of the more hawkish ECB policy makers pushed back on calls for rate increases beyond July. He acknowledged a July increase was a necessity but as for anything beyond July he noted, "it would at most be a possibility but by no means a certainty". Having tracked toward US$1.1270 the euro then shifted back below US$1.1250 touching session lows at US$1.1210 before finding support.
Our attentions turn now to UK CPI data. We expect to see headline inflation fall to 8.2%, still well too high for the Bank of England.

Expected Ranges

  • NZD/USD: 0.6180 - 0.6350 ▼
  • NZD/EUR: 0.5520 - 0.5640 ▼
  • GBP/NZD: 2.0520 - 2.1080 ▲
  • NZD/AUD: 0.9150 - 0.9320 ▼
  • NZD/CAD: 0.8220 - 0.8380 ▼