New Zealand dollar falls below 61 US cents
Daily Currency Update
The New Zealand dollar is weaker this morning when valued against the Greenback, currently trading at 0.6055 at time of writing. The NZDUSD pair faces an intense sell-off and slides below the round-level support of 0.6100 in Wednesday’s North American session. The pair plunged as the Reserve Bank of New Zealand (RBNZ) has cut its Official Cash Rate (OCR) by 50 basis points (bps) to 4.75%. The RBNZ cut rates by 25-bps in August, the first inter rate cut in over four years. The jumbo rate cut had been priced in by the markets but the dramatic move has sent the New Zealand dollar sharply lower. The rate statement noted that inflation was within the target range and was “converging on the 2% midpoint”. This is a remarkable turnaround by the central bank, which only a few months ago was warning that inflation was too high and could force the Bank to raise rates. The RBNZ had projected that the initial rate cut would not occur before mid-2025 but has moved up the timetable in dramatic fashion. The decision to cut rates by 50 bps is not surprising, given that inflation has been falling and GDP contracted in the second quarter. New Zealand releases the quarterly inflation report next week and if inflation is within expectations, it could set up another rate cut at the November meeting. Looking ahead, BusinessNZ will release the latest Performance of Manufacturing Index on Friday and Statistics New Zealand will release the latest monthly Food Price Index (FPI).Key Movers
The US dollar Index (DXY), which measures the value of the USD against a basket of six currencies, is gaining against almost all of its competitors as markets assess the Federal Open Market Committee’s (FOMC) September Meeting Minutes. The Minutes showed that Fed members agreed not to lock themselves into an aggressive easing path. The Minutes also indicated that future policy adjustments would depend on incoming data, while also noting that if the economy performs as anticipated, "it would likely be appropriate to gradually shift toward a more neutral policy stance." As a result, market players dropped bets of a 50 bps cut in November, with the odds for a 25 bps currently standing at around 85%. Looking ahead this week, the market focus will be glued to the release of the US Consumer Price Index (CPI) and the Producer Price Index (PPI) on Thursday and Friday, respectively.Global stocks advanced on Wednesday, along with US Treasury yields, as investors digested minutes from the Federal Reserve's September meeting and awaited inflation data for clues on the central bank's interest rate path. The Dow Jones Industrial Average (DJI) rose 346.47 points, or 0.82%, to 42,426.84. The S&P 500 (SPX) rose 25.84 points, or 0.45%, to 5,776.97 and the Nasdaq Composite (.IXIC) rose 57.66 points, or 0.32%, to 18,240.58.
On the data front, US wholesale inventories rose less than initially thought in August amid a sharp moderation in the pace of increase in motor vehicle stocks. If this trend is sustained, it could temper expectations for robust economic growth in the third quarter. The Commerce Department's Census Bureau said on Wednesday that wholesale inventories edged up 0.1%, revised down from the 0.2% gain estimated last month. Private inventory investment contributed to the economy's 3.0% annualised growth rate in the second quarter. Inventories and trade are the most volatile components of GDP.
Expected Ranges
- NZD/USD: 0.5950 - 0.6150 ▼
- NZD/EUR: 0.5450 - 0.5650 ▼
- GBP/NZD: 2.1450 - 2.1550 ▲
- NZD/AUD: 1.1000 - 1.1200 ▼
- NZD/CAD: 0.8200 - 0.8400 ▼