New Zealand dollar holding above the 62 US cents
Monday 4 July, 2022
Daily Currency UpdateThe New Zealand dollar continues to hold above 0.62 but currency markets overall show modest net movements. The Kiwi dollar broke below key support at 0.62 on Friday on the back of a deteriorating risk backdrop and falling commodity prices, falling to its lowest level in two years, before recovering to that level by the close of trading. NZ rates experienced big falls on Friday, and they are likely to extend those moves when trading opens this morning.
On the data front on Friday we saw a continuing run of weak survey data in New Zealand, the ANZ consumer confidence index fell further in June, to just 80.5, its second-lowest reading on record. Multiple factors are weighing on consumer confidence at present, including high inflation, sharply rising mortgage rates, and now falling house prices. This all points to elevated NZ recession risk over the next year or so. NZ building consents declined in May (albeit from very high levels) in response to the softening in the housing market. Looking ahead today and there are no scheduled releases.
Key MoversOn Friday's session in the US, we saw the release of the ISM Manufacturing survey, with the index falling from 56.1 to 53, its lowest level since mid-2020. The key New Orders sub-index fell into contractionary territory (49.2 from 55.1) while the Employment index fell further below 50, suggesting manufacturers are pulling back on hiring. Above 50.0 indicates industry expansion, and below indicates contraction. The weaker-than-expected ISM survey follows on from disappointing US consumer confidence and consumer spending data last week which fuelled concerns about growing US recession risk. US equities rebounded on Friday, the S&P500 increasing 1.1% and the NASDAQ managing a 0.9% rally. Even so, equities were lower on the week, by 2.2% on the S&P and 4.1% on the NASDAQ, consistent with the deteriorating growth signals coming from other asset classes.
Looking ahead this week and on Monday US banks will be closed in observance of Independence Day. On Thursday we will see the release of the Federal Open Market Committee (FOMC) Meeting Minutes which provides a detailed record of the FOMC's most recent meeting, providing in-depth insights into the economic and financial conditions that influenced their vote on where to set interest rates. Finally, on Friday all will be on the nonfarm payrolls report, where the market is looking for another robust 273k monthly jobs print and for the unemployment rate to hold steady at an ultra-low 3.6%.
- NZD/USD: 0.6100 - 0.6300 ▼
- NZD/EUR: 0.5850 - 0.6050 ▼
- GBP/NZD: 1.9350 - 1.9550 ▲
- NZD/AUD: 1.0850 - 1.1050 ▲
- NZD/CAD: 0.7900 - 0.8100 ▼