New Zealand dollar trades above 63 US cents
Monday 8 May, 2023
Daily Currency UpdateThe Kiwi dollar is stronger this morning when valued against the Greenback. Last week the Kiwi dollar reached the highest levels in a month, up half a percent and trading above 63 US cents heading into Friday’s European session. The Kiwi dollar remains supported after the Reserve Bank of New Zealand surprised markets in April, with its decision to increase interest rates by another 50 basis points to 5.25%, against expectations for a smaller move. NZ Consumer Price Index (CPI) moderated to 6.7% y/y in the first quarter and the lowest level in more than a year, but remains close to its three-decade highs (7.3%). Last week NZ unemployment rate steadied at 3.4%, not far from the historic lows (3.2%).
Fairly quiet week ahead on the local data front in New Zealand. On Thursday Statistics New Zealand will release Food Price Index (FPI). Although food is among the most volatile consumer price components, this indicator garners some attention because New Zealand's major inflation data is released on a quarterly basis. On Friday Business NZ will release the Performance of Manufacturing Index a survey of manufacturers that asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories. The Reserve Bank of New Zealand will release the quarterly Inflation Expectations a survey of about 100 consumers that asks respondents where they expect prices to be 24 months in the future. Finally, on Friday Statistics New Zealand will release the monthly Visitor Arrivals.
Key MoversThe latest employment report in the US the Nonfarm Payrolls on Friday showed that hiring in April exceeded estimates as the economy added 253K. This reading came in better than the market expectation for an increase of 179,000 in the aftermath of the US Federal Reserve (Fed) 25 bps rate hike on Wednesday. Following the Fed’s decision, market participants quickly began to price in rate cuts. The US jobs report revealed that Average Hourly Earnings rose 0.5% MoM, exceeding 0.3% forecasts, while the Unemployment Rate edged down to 3.4% from 3.5% in March. Finally, the Labor Force Participation Rate remained unchanged at 62.6%, compared to the market expectation of 62.5%. Once the data is in the rearview mirror, investors expect the Fed to hold rates unchanged for June’s decision.
The Pound Sterling, meanwhile, continues to be underpinned by UK monetary policy divergence with the US based on much higher inflation in the UK. Not since 1977 have British households faced food prices rising at a faster pace, while the headline rate of inflation is stuck above 10% higher than in any other G7 nation. Despite this, economists predict headline inflation will fall rapidly when figures for April are published later this month. With all eyes now on next Thursday’s Bank of England (BoE) monetary policy meeting with many forecasting the central bank will raise interest rates for a 12th consecutive time on Thursday, with predictions for a quarter-point rise from the current level of 4.25%.
- NZD/USD: 0.6200 - 0.6400 ▲
- NZD/EUR: 0.5600 - 0.5800 ▲
- GBP/NZD: 1.9950 - 2.0150 ▲
- NZD/AUD: 1.0600 - 1.0800 ▼
- NZD/CAD: 0.8300 - 0.8500 ▼