Kiwi edged higher as markets gloss over inflation increase
Friday 11 June, 2021
Daily Currency UpdateThe New Zealand dollar reversed its recent downtrend and enjoyed a modest gain back toward 0.72 US cents on Thursday. Markets appeared unperturbed by the alarmingly high US CPI print. Having priced in another outperformance, markets looked to fundamentals behind the headline number, identifying areas specific to the re-opening of the economy as a key driver in pushing up prices. While today’s strong print does nothing to ease concerns inflation will prove transitory, the market reaction suggest it believes prices will correct in coming months. Investors chased equities higher, pushing the S&P500 toward fresh record highs, while driving 10-year treasury notes toward 3-month lows in a distinct risk on move. Near-term inflation fears ease the door opens for the NZD to extend beyond the current trading range. An extension toward and through 0.7315 could see a push on toward year-to-date highs above 0.74 in the months ahead. Out attentions now turn to local GDP data release and federal reserve policy meeting. Please be advised there will be no Australian or New Zealand commentary on Monday the 14th of June. The dealing teams will still be available through the Public Holiday and happy to answer any queries you may have.
Key MoversActivity across currency markets was largely muted on Thursday as investor’s reaction to the US CPI print and ECB policy meeting were well contained. Analysts largely ignored the US CPI data release having already priced in a bumper print and seemingly saw little within the underlying fundamentals that would force the Fed to shift its current view that inflation is transitory. Markets drove gains across risk assets, suggesting there is an expectation monetary policy will remain accommodative for some time. The Great British pound benefited from the weaker USD, touching highs at 1.4170, while the euro tracked sideways, unable to shake the ECB dovish review. The ECB elected to maintain its emergency level of bond buying, suggesting the market expectation for a moderation was misplaced at this time. Our attentions turn now to UK GDP and monthly activity data ahead of a US consumer sentiment and inflation expectations data release.
- NZD/USD: 0.7130 - 0.7250 ▲
- NZD/EUR: 0.5850 - 0.5950 ▲
- GBP/NZD: 1.9570 - 1.9770 ▲
- NZD/AUD: 0.9250 - 0.9340 ▼
- NZD/CAD: 0.8670 - 0.8740 ▲