NZD under pressure as USD extends post non-farm payroll gains
Written by
Daily Currency Update
The New Zealand dollar extended Friday's post-US non-farm payroll sell-off through trade on Monday, slipping below US$0.6050, to levels not seen since November. Markets were forced to continue adjusting expectations for US rate cuts after Fed Chair, Jerome Powell, affirmed comments made after the Fed Policy meeting last Wednesday in an interview with 60 minutes.With ISM services data printing ahead of expectations, US yields surged and markets priced out a rate cut in March, forcing the NZD to mark fresh year-to-date lows at US$0.6039. Fed policy and implied monetary policy expectations remain key in shaping NZD direction.
Our attention now turns to the RBA policy meeting today ahead of domestic labour market data tomorrow. With the NZD and AUD vulnerable to further downside moves against the USD, domestic data will prove key in shaping direction between the antipodean counterparts.
With the RBNZ expected to maintain a hawkish bias, a divergence in central bank expectations could allow the NZD to extend a break toward AU$0.94, or force a break back toward AU$0.90/AU$0.91.
Key Movers
The US dollar extended gains through trade on Monday as US yields advanced on stronger-than-expected ISM services data and hawkish commentary from Fed Chair Jerome Powell. Two and ten-year treasury yields continued their rise, dragging the USD higher against major counterparts, as markets unwind bets for a March rate cut.Analysts and investors have been forced to concede they had moved too early in pricing a loosening of monetary policy as robust macro data affords the Fed greater scope to maintain tighter conditions and truly quash inflation.
While the FOMC acknowledged rate cuts will be appropriate through 2024, the timing and trajectory has been pushed back from late Q1 to late Q2/early Q3, allowing the USD to recoup losses suffered in December and maintain near-term momentum. We are keenly attuned to any signal from Fed officials as to forward guidance as key officials hit the wires this week.
In other news, the GBP was a notable underperformer, despite stronger-than-expected Services data in January. Sterling gave up three-quarters of a per cent, while the USD continued its march back toward 150 against the yen and the euro struggled to mount a recovery back above 1.08.
Expected Ranges
- NZD/USD: 0.6000 - 0.6180 ▼
- NZD/EUR: 0.5580 - 0.5680 ▲
- GBP/NZD: 2.0520 - 2.0820 ▼
- NZD/AUD: 0.9250 - 0.9400 ▲
- NZD/CAD: 0.8120 - 0.8220 ▲