Kiwi set to retest 0.62 levels
Monday 11 July, 2022
Daily Currency UpdateThe New Zealand dollar hit two-year lows last week as fears China, the world’s second-biggest economy will fall into recession. On Friday the NZD finished 0.24% higher and a third successive day of gains as risk sentiment improved throughout the week. With a lack of data during the domestic trading session, the unfortunate news of former Japanese prime minister Shinzo Abe’s death while campaigning for a parliamentary election sent shockwaves through financial markets and a flight to safe-haven currencies. Eventual lows for the NZD/USD were seen at 0.6131 following a stronger than expected jobs report in the United States before reversing losses and trade 60 points higher to close at 0.6189.
With little domestically on the agenda today, the New Zealand dollar opens this morning at 0.6185. Investors look toward Wednesday's latest RBNZ interest rate decision where it is expected Governor Adrian Orr will increase rates by 0.5% to 2.5%. We expect support levels to hold onto moves approaching 0.6140 today, while any upward push will likely meet resistance at 0.6240.
Key MoversNon-Farm Payroll data was positive on Friday night, increasing by 372,000 jobs and ahead of expectations, indicating the job market is still strong despite fears of a recession into 2023. The headline unemployment rate was also steady at 3.6% for the fourth straight month in a row. Wage growth more importantly continued to grow strongly at 5.1% for average hourly pay suggesting a 50bps interest rate rise is a sure thing at the next FOMC meeting on the 27th of July and priced in at 93% in the latest reading on the CME Fedwatch Tool.
The US Dollar Index (DXY) was slightly lower on the day (-0.13) despite hitting 20-year highs this week closing at 106.90. The Dow finished 0.15% lower, as treasury yields rose following the stronger than expected jobs print. Brent Crude finished 2.3% higher to $107 a barrel.
Elsewhere in the United Kingdom Boris Johnson officially resigned as the UK Prime Minister. The Great British Pound rose slightly following the news, hitting 1.2050 before trading flat on the day, closing at 1.2027. The EUR/USD remains under pressure despite finishing 0.3% higher to 1.0186. Despite the assassination of former Prime Minister Shinzo Abe on Friday, Japan forged ahead on Sunday with its House of Councillors elections as the Liberal Democratic Party (LDP) looks to shore up a winning majority as 124 upper house seats are elected in the upper house. The greenback finished 0.06% higher against the Yen on Friday (1.3604).
- NZD/USD: 0.6140 - 0.6240 ▼
- NZD/EUR: 0.6050 - 0.6110 ▲
- GBP/NZD: 1.9200 - 1.9600 ▼
- NZD/AUD: 0.9000 - 0.91000 ▲
- NZD/CAD: 0.7950 - 0.8050 ▼