Kiwi tests 63 US cents following weak United States data
Monday 25 July, 2022
Daily Currency UpdateThe New Zealand dollar finished a cent higher last week on improved risk sentiment despite finishing 0.04% lower on Friday. Contracting Flash Manufacturing and Services PMI across the Tasman saw the NZD push slightly higher (0.13%) on the day against the Australian dollar following a high of 0.9041.
The majority of price action occurred in overnight markets on Friday as the NZD/USD soared to intraday highs of 0.6304. The greenback was sold off following a disappointing read on Flash Services PMI in the United States, contracting in July for the first time in two years. Profit taking was seen into the closing bell, finishing at 0.6247.
The New Zealand dollar opens higher this morning at 0.6253 with little domestic data on the horizon today. The RBNZ is due to convene on Wednesday to release its Statement of Intent which reports on the objectives of the central bank over the next three years. We expect support levels to hold onto moves approaching 0.6210 today, while any upward push will likely meet resistance at 63 US cents.
Key MoversA plethora of disappointing Services and Manufacturing data out of the European region saw the EUR/USD initially dip to lows of 1.0129 on Friday. The reading out of France of 49.6 for July saw a 20-month low as the economy heads towards stagnation into the third quarter. The Euro was eventually supported higher as ECB President Christine Lagarde said they will raise rates for as long as it takes to bring inflation back to target signalling a move away from historic lows in monetary policy setting. The ECB moved rates higher by 50bps for the first time in over a decade on Thursday.
Elsewhere the greenback was also weaker on Friday as both Flash Service and Manufacturing PMI numbers contracted for July as recession and rising inflation look to put pressure on the FOMC to raise rates faster than its current pace. The US Dollar Index (DXY) initially dropped to 1.0611 before recovering to finish 0.06% lower on the day to 1.0654. The GBP/USD cross closed higher (1.2004) following a slight rise in their Manufacturing and Services PMI and its 17th straight month of expansion. Retail sales were also a slightly better reading than expected despite still falling 0.1% in June.
This week takes focus on the Federal Open Market Committee (FOMC) which is set to potentially raise rates by a full percentage point on Thursday morning as they look to curb rising inflation which hit a 41-year high of 9.1% in June. The CME Fedwatch Tool is currently pricing an 80% chance of a 75bps hike by the Federal Reserve.
- NZD/USD: 0.6210 - 0.6300 ▼
- NZD/EUR: 0.6100 - 0.6160 ▲
- GBP/NZD: 1.9050 - 1.9300 ▼
- NZD/AUD: 0.9000 - 0.9100 ▲
- NZD/CAD: 0.8040 - 0.8120 ▲