Home Daily Commentaries New Zealand dollar trades above 64 US cents

New Zealand dollar trades above 64 US cents

Monday 12 December, 2022

Daily Currency Update

The Kiwi dollar closed the week above the 64 US cent mark. On the data front last Friday we saw the release of quarterly Manufacturing Sales which saw the volume of total manufacturing sales rise 3.1 percent, following a 4.8 percent fall in the June 2022 quarter. In actual terms, the volume of finished goods stocks for total manufacturing fell 9.5 percent ($956 million) in the September 2022 quarter compared with the September 2021 quarter. Volumes for dairy and meat products, the country's biggest export earners, rose 11.6 percent. Looking ahead this week and on Monday Statistics New Zealand will release the monthly Visitor Arrivals. Tourism plays an important role in the economy about 7% of the population is employed by the tourism industry, and a sizable portion of the nation's GDP is indirectly related to tourism. On Tuesday we will see the release of NZ Food Price Index (FPI). Although food is among the most volatile consumer price components, this indicator garners some attention because New Zealand's major inflation data is released on a quarterly basis. On Wednesday we will see the release of the Current Account which is directly linked to currency demand. A rising surplus indicates that foreigners are buying more of the domestic currency to execute transactions in the country. On Thursday we will see the release of NZ Gross Domestic Product (GDP) which is expected to come in at 0.9%. Finally, on Friday we will see the release of the Performance of Manufacturing Index.

Key Movers

On Friday U.S. producer prices rose slightly more than expected in November amid a jump in the costs of services, but the trend is moderating, with annual inflation at the factory gate posting its smallest increase in 1-1/2 years. The report from the Labor Department on Friday also showed underlying producer prices increasing at their slowest pace since April 2021 on a year-on-year basis. Consumers' one-year inflation expectations fell to a 15-month low in December, other data showed. As a result, we saw the S&P500 and NASDAQ both fall 0.7%. Last week saw a sizeable pullback in US equity markets, with the S&P500 off 3.4% and the NASDAQ 4%. A separate report from the University of Michigan showed its measure of consumers' one-year inflation expectations fell to 4.6% this month, the lowest reading since September 2021, from 4.9% in November. The survey's five-year inflation outlook was unchanged at 3.0% in December. Looking ahead this week and all eyes will be on the US CPI data released tomorrow night, with the market looking for another 0.3% m/m reading for core inflation. Last month’s downside surprise to core inflation sparked a wave of optimism that US inflation might have peaked, leading to a pullback in Fed rate expectations and contributing to the surge in risk assets. The Federal Reserve's two-day policy meeting this week is expected to increase by the cash rate by 50bps, a step down from the recent 75bps per-meeting pace. This would take the upper end of the target range to 4.50%.

Expected Ranges

  • NZD/USD: 0.6250 - 0.6450 ▲
  • NZD/EUR: 0.5950 - 0.6150 ▲
  • GBP/NZD: 1.8950 - 1.9150 ▼
  • NZD/AUD: 1.0450 - 1.0650 ▲
  • NZD/CAD: 0.8550 - 0.8750 ▼