NZD outperforms following much weaker than expected US data set
Daily Currency Update
The New Zealand dollar was the strongest performed Tuesday lurching upward following softer-than-expected US data releases. The NZD tested last week's low of US$5890 early before much weaker than anticipated US labour market and consumer sentiment reports spurred a run on the USD. The US JOLTS report showed new job openings plunged to the lowest level in two years, a definitive retracement and confirmation the downward trend of the last few months is gathering momentum. A softening in the labour market is key to the Fed achieving its inflation goals. As the labour market shows signs of weakness consumer confidence typically falters, as was the case Tuesday. The Conference Board’s consumer sentiment report showed a decline in consumer comfort, weighing on consumption and growth expectations leading into Q4. The two softer prints drove down US treasury yields and the USD propelling the NZD toward intraday highs at US$0.5980. While stopping short of a break back above US$0.60 the NZD found added support in a stronger Chinese yuan. More reports of incremental change in Chinese stimulus plans helped anchor technical supports on moves below US$0.59.Having enjoyed strong gains against the USD the NZD is also stronger against the GBP, AUD and CAD as our attentions turn to the Australian and German inflation data and the US ADP payroll data as key markers for direction.
Key Movers
The USD closed the day weaker following weaker-than-anticipated labour market and consumer confidence reports. After enjoying early gains the USD plunged 8 tenths of a percent following the data releases as treasury yields fell and risk assets rallied. The 2-year rate gave up 14 basis points sliding back below 5% to 4.89% while the 10-year rates dropped from 4.24% to 4.12%. The aggressiveness of the market move seems spurred by Fed Chair Jerome Powell’s comments at last week's Jackson Hols Symposium wherein he highlighted the importance of responding to data and that future decisions will be data-dependent. The weaker data reduces the likelihood of another rate hike and amplifies calls for policy makers to loosen monetary policy in 2024. The euro is back above US$1.0850 while the yen put a pause on the USD appreciation. Having eyed a break above ¥147.50 the USD is now back below ¥146, while the pound remains trapped between US$1.2550 and US$1.2750.Our attention now turns to the German CPI ahead of Euro area inflation later this week and the US ADP payroll ahead of Friday’s non-farm payroll print.
Expected Ranges
- NZD/USD: 0.5890 - 0.6030 ▲
- NZD/EUR: 0.5400 - 0.5520 ▲
- GBP/NZD: 2.1020 - 2.1420 ▼
- NZD/AUD: 0.9180 - 0.9280 ▲
- NZD/CAD: 0.8020 - 0.8120 ▲