Daily Currency Update
The New Zealand dollar crept upward through trade on Thursday, buoyed by a weaker US dollar. Markets have now almost fully retraced the US dollar post CPI gains, extending the correction after US retail sales and industrial production data missed the mark in January. Treasury yields fell, allowing the NZD to climb back through US$0.61 to mark intraday highs at US$0.6126 before settling into a narrow range between US$0.61 and US$0.6110. Our attentions turn now to RBNZ Governor Orr as he speaks about monetary policy and the banks 2% inflation remit. With calls for the RBNZ to lift rates we are keenly attuned to any clues Orr may offer as to future policy direction. With domestic manufacturing PMI data due and US PPI inflation expectation reports on the docket we could see an elevated level of volatility leading into the weekly close.
Key Movers
The US dollar continued unwinding gains won following Tuesday’s hotter than expected CPI print, sliding against most major counterparts after retail sales data missed the mark and treasury yields retreated. Headline retail sales retracted 0.8% in January, while analysts revised down November and December numbers suggesting cracks may be appearing in the US economy. While some of the downturn can be explained by seasonal factors, softer manufacturing and industrial production data adds weight behind calls the economy is losing steam. With treasury yields dipping the USD is weaker against commodity currencies and the euro, while the GBP and JPY are the days notable under performers. Both the UK and Japanese GDP data printed below expectations and tipped both economies into technical recession through the 2nd half of 2023 raising questions as to the path of monetary policy moving forward. While BoE members dismissed the data, affirming a commitment to controlling inflation pressures and markets adjusted expectations for a rate cut, market movements were somewhat muted given policy makers appear unmoved. With Japan GDP data contracting, hopes the BOJ will raise rates and abandon its negative rate policy faded, even if the downturn in domestic activity can be explained by rising inflation. The USD remains above 150 and our attentions turn now to US PPI data and inflation expectations for direction into the weekly close.
Expected Ranges
- NZD/USD: 0.6050 - 0.6150 ▲
- NZD/EUR: 0.5620 - 0.5720 ▲
- GBP/NZD: 2.0500 - 2.0800 ▼
- NZD/AUD: 0.9300 - 0.9400 ▼
- NZD/CAD: 0.8180 - 0.8280 ▼