Home Daily Commentaries NZD gives up 0.65 US cents amid US dollar rebound

NZD gives up 0.65 US cents amid US dollar rebound

Daily Currency Update

The New Zealand dollar fell through trade on Wednesday unable to stave off a US dollar rebound. Having given up US$0.65 late in the domestic session, the NZD found momentum leading into the Bank of Canada meeting and monetary policy update. Buoyed by expectations policymakers would raise interest rates and confirmation China will invest 120 billion in new infrastructure plans, the New Zealand dollar marked intraday highs at US$0.6540 before falling sharply lower following a stronger than anticipated US ISM manufacturing report. The key US macroeconomic print came in stronger than anticipated for May, surprising analysts expecting a downturn. Activity rebounded while inflation indicators eased slightly and while the employment index fell, the impact to the labour market and job openings wasn’t enough to sway investors and prevent an extension in rates expectations. US rates surged back toward 3% and investors again began pricing for aggressive Fed policy action. The NZD slipped back below US$0.65 to touch session lows at US$0.6470. Having found some support the NZD buys US$0.6487 on open this morning.

With little of note on the domestic ticket, our attentions turn now to US ADP employment data. While traditionally unreliable in forecasting Non-Farm payroll results with jobless claims rising through April ADP data will provide an interesting pre-cursor and marker of overall labour market health

Key Movers

The US is broadly stronger on the heels of a robust ISM manufacturing survey which elevated expectations for rate hikes while forcing investors to adopt a more cautious approach to risk. US 2 and 10-year rates surged overnight up 13 and 9 basis points as global rates again enjoyed significant gains. Against this backdrop, the JPY came under pressure and the USD surged back above ¥130, while the euro failed to keep pace, slipping back toward US$1.0650 and the British pound gave up US$1.25 marking intraday lows at US$1.2475. In contrast, the Canadian dollar held up well, buoyed by a 2% surge in oil prices and the Bank of Canada monetary policy update. As expected, policymakers lifted the underlying cash rate by 50 basis points to 1.5% but the accompanying statement was much more hawkish than analysts anticipated. The bank noted inflation remained elevated and fears price pressures would become entrenched required forceful policy action. The aggressive rhetoric buoyed market expectations for future rate hikes with some market commentators now pricing in a 75 basis point hike. With a 20% chance of a three-quarter percent hike in July now priced in, we are keenly attuned to upcoming inflation data. A stubbornly elevated print will see expectations firm and could help support the CAD in the near term.

Expected Ranges

  • NZD/USD: 0.6450 - 0.6550 ▼
  • NZD/EUR: 0.6050 - 0.6120 ▲
  • GBP/NZD: 1.9120 - 1.9450 ▼
  • NZD/AUD: 0.8990 - 0.9070 ▼
  • NZD/CAD: 0.8150 - 0.8250 ▼