Home Daily Commentaries Elevated calls for Fed to front-load rate cuts help underpin NZD uptick

Elevated calls for Fed to front-load rate cuts help underpin NZD uptick

Matt Richardson
Written by
Matt Richardson

Matt Richardson

OFXpert

Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange.

| Tuesday 17 September, 2024

Daily Currency Update

The New Zealand dollar advanced through trade on Monday as markets prepare for this week's all-important Fed policy meeting. Betting for a 50-point rate cut has firmed since Friday as markets elevate calls for policymakers to front-load rate cuts amid signs the US economy is rumbling toward recession.

With US rates forced lower and the USD broadly softer, the NZD jumped half a per cent on last week's close pitching back toward US$0.62. It tracked sideways against the AUD, enjoyed strong gains against the euro and edged lower against the outperforming GBP and JPY.

There is little of note on today’s domestic ticket and our attentions remain squarely affixed on the Fed policy meeting and market rate expectations for direction through trade this week.

Key Movers

The US dollar tracked lower through trade on Monday as markets prepare positions ahead of this week’s much anticipated Fed policy meeting. Analysts have elevated calls for the Federal Open Market Committee (FOMC) to front-load rate cuts and issue a 50-point rate adjustment.

Articles in the Financial Times and Wall Street Journal Friday prompted traders to firm bets for a larger hike, while comments at the weekend by NY Fed President Dudley allowed them to double down as Dudley opined the “Fed should go big now and I think it will”.

Markets have now priced a 41-point cut or a 65% probability of a 50-point rate adjustment forcing US treasuries and the dollar lower. The DXY index is 0.4% lower as the yen led gains against lower US rates, the pound was the best-performing European currency and the euro enjoyed only modest gains.

Our attention this week remains firmly affixed to the FOMC policy meeting and statement with US retail sales and Canadian CPI data providing some colour through trade today.

Expected Ranges

  • NZD/USD: 0.6120 - 0.6220 ▲
  • NZD/EUR: 0.5520 - 0.5620 ▲
  • GBP/NZD: 2.1200 - 2.1400 ▼
  • NZD/AUD: 0.9150 - 0.9220 ▼
  • NZD/CAD: 0.8350 - 0.8450 ▲

Written by

Matt Richardson

OFXpert

As a Senior Corporate Client Manager, Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange. Matt has clients who he has been working with for over a decade, a testament to his knowledge and dedication in the field. Matt is also a regular contributor on Ausbiz, offering clear and precise updates on currency market trends, showcasing his ability to interpret complex financial data into actionable insights.