NZD falters as global rates rise and China sets underwhelming post-Covid targets.
Tuesday 7 March, 2023
Daily Currency UpdateThe New Zealand dollar fell through trade on Monday, sliding back below US$0.62 following an uptick in global rates and a disappointing Chinese Growth forecast. Having outperformed last week, the NZD has failed to extend its break above US$0.6250 toward US$0.63. Retreating on Monday as investors digested reports China opted to set its GDP growth target below expectations at 5%. After last week's record PMI print and the rapid rebound in economic activity following the removal of Covid restrictions, markets had hoped officials would set a more aggressive target. The softer goal should be easily beaten, but in setting a lower target, policymakers have dampened expectations for fiscal and monetary policy stimulus. Our focus today turns to the RBA policy update and commentary from Fed Chair, Jerome Powell, as he addresses a senate panel on monetary policy. With the current narrative driven by expectations for additional rate hikes, any dovish signal that weakens the global growth outlook should spark volatility.
Key MoversIn what was a relatively quiet start to the week price action across majors was spurred by hawkish commentary from key ECB policymakers. With the US treasury retreating back below 4% on Friday, euro rates lifted as markets looked to adjust expectations for a peak ECB fund rate. Commentary from Belgian and Austrian board members suggests an additional three 50-point rate hikes will be needed if the bank is to control inflation and normalise prices. While the comments were countered by the board, more dovish members with a penchant for relying heavily on data markets were quick to lift expectations for the peak rate beyond 4% and toward 4.25%. With rates higher, the euro climbed up nearly half a per cent on Friday's close. With little else of note to cover our attentions turn now to commentary from Fed Chair Jerome Powell as he addresses the senate panel on Monetary Policy. Given the strong positive data seen through February, we anticipate Powell will adopt a more Hawkish tone when compared with his last panel appearance, underpinning expectations for US rates action and propping up the USD.
- NZD/USD: 0.6120 - 0.6250 ▼
- NZD/EUR: 0.5750 - 0.5850 ▼
- GBP/NZD: 1.9280 - 1.9520 ▲
- NZD/AUD: 0.9130 - 0.9250 ▼
- NZD/CAD: 0.8380 - 0.8480 ▲