Home Daily Commentaries Kiwi lower ahead of RBNZ Inflation Expectations report

Kiwi lower ahead of RBNZ Inflation Expectations report

Daily Currency Update

The New Zealand dollar fell 0.90% on Friday following a stronger Non-Farm Payroll print and a reduction of the unemployment rate in the United States to 3.5%. Opening just below the 63 US cent handle, there was little domestic data to move the local currency, the NZX50 finishing 0.06% lower on the day. Broader US dollar strength in the North American session following the robust jobs number saw the NZD/USD cross initially plummet from the range of 0.6290 – 0.6300 to lows of 0.6220 before a recovery into the final bell to close at 0.6240.

Investors will be eagerly watching today’s release of Inflation expectations by the RBNZ which provides guidance for the next two years on the price of goods and services. Headline inflation in the June quarter rose above 7% p/a and 32-year highs as food, fuel and housing led the increase as markets are pricing another 50 basis point hike by the RBNZ on August 17th and could peak at 4% p/a by year-end. The New Zealand dollar opens this morning at 0.6243. We expect support levels to hold onto moves approaching 0.6210, while any upward push will likely meet resistance at 0.6290.

Key Movers

The US dollar was the main winner on Friday following a better than expected Non-Farm Payrolls print, as the US economy added 528,000 jobs in July vs expectations of 250,000. Unemployment also declined to 3.5% as the labour market remains tight. Average earnings ticked higher to 0.5%, increasing year-on-year to 5.2%. It is expected the FOMC will remain aggressive in its monetary policy tightening and is likely to hike another 75 basis points in September as the CME Fedwatch Tool prices it as a 68% chance (up from 28% on the 29th of July). The US Dollar Index (DXY) which measures a basket of currencies against the greenback surged to an intraday higher of 1.0693 before closing at 1.0657 and 0.78% higher on the day.

Elsewhere the Canadian jobs report was not as strong, seeing a drop of 30,600 jobs for the month of August, disappointing markets with the unemployment rate unchanged at 4.9%. The CAD/USD dropped to intraday lows following the news to 0.7699 before finishing 0.57% lower at 0.7725.

Despite the biggest interest rate hike in 27 years by the Bank of England on Thursday, the Great British pound was no match for the greenback following suit lower with all G10 currencies. Halifax HPI which measures the price of homes saw its first drop in 12 months dropping 0.1% for the month. Cable slide 0.74% lower to 1.2067 on the day. This week investors focus on the last United States CPI print for the month of July due for release on Wednesday evening.

Expected Ranges

  • NZD/USD: 0.6210 - 0.6290 ▼
  • NZD/EUR: 0.6100 - 0.6165 ▼
  • GBP/NZD: 1.9200 - 1.9500 ▲
  • NZD/AUD: 0.9000 - 0.9080 ▼
  • NZD/CAD: 0.8030 - 0.8120 ▼