NZD buoyed by softer USD and promise of China stimulus
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Daily Currency Update
The New Zealand dollar advanced through trade on Thursday, buoyed by an uptick in risk sentiment and a broadly softer US dollar. Domestic inflation data in the form of selected price indicators printed largely in line with Q3 forecasts and did little to move the needle. Fixed income yields were unchanged and pricing for the next BNZ policy meeting unmoved. Instead, markets looked to the ECB and US PPI data for direction. As expected, the ECB cut rates but refused to be drawn on future policy decisions, while US PPI data did little to shift market expectations ahead of next week's Fed rate announcement. With risk sentiment buoyed and the promise of Chinese stimulus underpinning gains across key commodities, the NZD lurched back above US$0.36150 to mark session highs at US$0.6183, holding gains leading into this morning's open.Our attentions turn now to domestic PMI data ahead of US consumer sentiment numbers and a slew of Chinese activity sets.
Key Movers
The European Central Bank cut interest rates overnight, reducing the benchmark cash rate by 25 basis points to 3.5%. Markets had priced in the move, instead looking to the post meeting statement for guidance on future policy direction. Officials staunchly defended the need to remain data dependent and would give no commitment as to which direction the ECB was leaning in October, but they did downgrade growth forecasts and slightly increase near-term inflation expectations. While the growth outlook remains anaemic, inflation pressures linger and the market trimmed its expectations for rate cuts into the end of the year, with just 40 points of additional cuts now priced in. With rate cut expectation tempered, the euro jumped four tenths of a percentage point, climbing back through 1.1050 to mark intraday highs just short of 1.1075. With the ECB policy decision in the books, attentions turned to US PPI data and while we saw a marginal uptick in the quarterly core number, a downward revision of July numbers tempered any concern surrounding inflation and did little to force a change in market expectations ahead of next week's fed policy meeting. The US dollar closed the day weaker against most majors.Our attentions turn now to US consumer sentiment data ahead of a slew of Chinese activity metrics due at the weekend.
Expected Ranges
- NZD/USD: 0.6120 - 0.6220 ▲
- NZD/EUR: 0.5500 - 0.5600 ▲
- GBP/NZD: 2.1100 - 2.1300 ▼
- NZD/AUD: 0.9150 - 0.9220 ▼
- NZD/CAD: 0.8320 - 0.8420 ▲