Home Daily Commentaries NZD primary beneficiary of US dollar weakness

NZD primary beneficiary of US dollar weakness

Daily Currency Update

The New Zealand dollar outperformed through trade on Wednesday, buoyed by a weaker US dollar and improved risk sentiment. In the absence of headline domestic data the NZD tracked sideways through the domestic session, bouncing between US$0.6070 and US$0.61 before softer jobs data and neutral commentary from Federal Reserve Chairman, Jerome Powell drove the US lower and allowed the NZD to extend a break above US$0.61, marking intraday highs at US$0.6141. The NZD seems to have found support on moves approaching US$0.6050, yet remains vulnerable to fluctuations in US rate expectations.

Our attentions turn now to the ECB policy meeting, China trade data and US jobless claims for direction leading into Friday’s all-important US non-farm payroll print.

Key Movers

The USD retreated through trade on Wednesday, underperforming amid a soft labour market print and confirmation from Federal Reserve Chairman, Jerome Powell that interest rates have reached their peak. Equities rallied and the DXY index fell after ADP payroll data printed largely in line with expectations while new job openings fell and employee retention rose. A deep dive into the data showed the number of employees voluntarily quitting in search of new employment fell to its lowest level post-COVID, suggesting labour conditions are tightening. Macro data sets have begun pointing lower allowing the Fed to focus on inflation and lay the foundations for cutting rates later this year. Fed Chair, Jerome Powell testified in front of Lawmakers on Wednesday, affirming the Fed remains data dependent but expects to dial back policy at some point this year. The USD slipped below 149.50 against the Yen while the EURO pushed back above 1.09, its highest level in over 5 weeks, and the GBP jumped back through 127 to mark intraday highs at 127.50.

In other news, the Bank of Canada left rates on hold at 5% and offered little to change expectations for a rate cut in July. The UK budget had few headline items to grab market attention with the only real point of note was an increase in treasury borrowing to fund increased stimulus.

Our attentions turn now to the ECB policy meeting, China trade data and US jobless claims. We expect the ECB will leave rates on hold but will be on the lookout for clues as to the timing and trajectory of monetary policy change.

Expected Ranges

  • NZD/USD: 0.6050 - 0.6200 ▲
  • NZD/EUR: 0.5550 - 0.5650 ▲
  • GBP/NZD: 2.0650 - 2.0950 ▼
  • NZD/AUD: 0.9300 - 0.9400 ▼
  • NZD/CAD: 0.8220 - 0.8320 ▲

Written by

Matt Richardson

OFXpert

As a Senior Corporate Client Manager, Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange. Matt has clients who he has been working with for over a decade, a testament to his knowledge and dedication in the field. Matt is also a regular contributor on Ausbiz, offering clear and precise updates on currency market trends, showcasing his ability to interpret complex financial data into actionable insights.