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NZD buoyed by tech gains and improved risk appetite

Tuesday 24 January, 2023

Daily Currency Update

The New Zealand dollar edged higher through trade on Monday, maintaining Friday’s momentum and testing resistance on moves approaching US$0.65. With little to note on the domestic macroeconomic ticket and an absence of top-tier newsflow market attention remained affixed to US rate expectations amid a downturn in inflation pressures. Investors are seemingly encouraged by the correction in price pressures and signal the Fed plans to slow the pace of rate hikes when it meets next week, driving improved demand for risk assets. Key equity indices extended Friday’s upturn on Monday helping drag the NZD higher, yet resistance on moves above US$0.65 remains intact. With little to note on today’s docket, our attention turns to domestic CPI inflation data tomorrow. Domestic inflation pressures remain sticky and another surprise uptick in the Consumer Price Index will give the RBNZ license to sustain its current path of rate hikes, adding a floor beneath the NZD.

Key Movers

Price action across majors was mixed through trade on Monday as the euro marked fresh nine-month highs while the yen met sustained downward pressure. The USD extended its recovery against the yen, pushing back above 130 amid an improved global rates backdrop and continued shorting of the yen following last week's Bank of Japan policy meeting. Markets had anticipated the BoJ would announce changes to its outdated yield curve control policy and policymakers' decision to stay the course has forced markets to re-adjust short-term rate expectations and rewind recent JPY gains. The euro surged toward fresh nine-month highs, breaking through 1.09 to touch 1.0925 before slipping back toward 1.0850 amid improved USD demand. The GBP failed to hold onto rallies beyond 1.24, slipping back below 1.2350, before finding support and moving back toward 1.2360 leading into this morning’s open. Attention now turns to a slew of PMI data. We expect activity to have slowed across the US and UK while European data should point to improved activity. An uptick in European PMI could help the single currency consolidate a break above 1.09 as the focus shifts to next week's Fed and European Central Bank policy updates.

Expected Ranges

  • NZD/USD: 0.6380 - 0.6500 ▲
  • NZD/EUR: 0.5930 - 0.6000 ▲
  • GBP/NZD: 1.8980 - 1.9220 ▼
  • NZD/AUD: 0.9180 - 0.9300 ▼
  • NZD/CAD: 0.8580 - 0.8720 ▲