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NZD range bound ahead of US inflation data

Wednesday 12 January, 2022

Daily Currency Update

The New Zealand dollar opens higher this morning, testing 0.68 US cents on the heels of a broader swing toward commodity currencies and general USD softness. Having tracked sideways through the domestic session the NZD slipped below 0.6750 through the early hours of the Northern Hemisphere trading session before a push toward commodity currencies, led by an uptick in oil prices which allowed the NZD to mark new intraday highs at 0.6790. The NZD remains firmly entrenched within a narrow trading range, well-supported on moves approaching 0.6730/0.67 yet unable to make significant inroads on forays above 0.68. While the US dollar hasn’t enjoyed the momentum, we expected to start the year near term NZD upside remains plagued by Fed monetary policy expectations and a likely accelerated path to normalisation. Our attentions turn now to US CPI inflation data for December. Price pressures are key in driving policy and another robust print could see the NZD test the lower end of recent ranges.

Key Movers

The CAD and NOK led gains across G-10 currencies through trade on Tuesday, emboldened by an uptick in oil prices. A general push toward commodity led units prompted USD weakness, forcing the dollar index back toward 95.50 down some 0.4% on the day and off highs above 96. While the USD has not enjoyed the same upward momentum, as we forecasted at the end of 2021, it remains well-supported by the promise of accelerated monetary policy and higher treasury yields. Our focus today turns to an all-important CPI inflation print. Controlling price pressures is now a key mandate for the Fed and another robust print will all but guarantee a March rate hike. With policymakers keen on reducing balance sheet pressures, expectations for a fourth-rate hike continue to grow. An uptick in year-on-year price growth beyond 7% could help fuel another dollar run. A break above 96.20 could signal a push toward 97, adding pressure on key counterparts like the euro, yen and pound.

Expected Ranges

  • NZD/USD: 0.6680 - 0.6830 ▲
  • NZD/EUR: 0.5920 - 0.6020 ▼
  • GBP/NZD: 1.9980 - 2.0180 ▲
  • NZD/AUD: 0.9390 - 0.9450 ▼
  • NZD/CAD: 0.8480 - 0.8580 ▼