Home Daily Commentaries NZD slips up in face of China economic headwinds

NZD slips up in face of China economic headwinds

Daily Currency Update

The New Zealand dollar gave up last week's high through trade on Monday, slipping back below US$0.62, amid a softer risk backdrop and ongoing concerns surrounding China’s economic outlook.

Having opened just south of US$0.6250, the NZD fell steadily through the domestic session amid a weaker risk backdrop. Hopes China officials would announce new expansive stimulus plans at the State Council Meeting were dashed with policymakers refusing to be drawn on fiscal spending plans.

The yuan fell through the day giving up 7.16, with losses spilling over into the NZD and AUD as major proxies. With broadly stronger USD compounding issues, the NZD marked intraday lows at US$0.6195 and opens this morning only marginally higher at US$0.6199.

Our attention now turns to a domestic consumer confidence report, US housing data, China rates update, the RBA meeting minutes and commentary from key Fed officials. With the economy officially tipping into a recession, we expect little in the way of the domestic consumer confidence data with direction driven by China rates data and US Fed commentary.

With markets at odds with Fed Forward guidance, commentary from members Bullard and Williams will help shape direction through the week ahead.

Key Movers

The USD was broadly stronger through trade on Monday, despite local markets closing in observance of a long weekend. With risk appetite softening, the USD worked to recoup some of last weeks post FOMC losses, punching back through 7.16 against the yuan, forcing the euro back toward 1.09, the pound back below 1.28 and holding firm against the yen at 142.

Global rates traded higher, led by European and UK Yields. ECB member Schnabel suggested inflation risks remain on the upside and that the central bank needs to err on the side of doing too much. While other members offered more dovish assessments of conditions, markets latched onto Schnabel’s comments, lifting expectations for rate hikes through Q3.

UK rates continue their upward march, led by the short end of the curve with 2-year gilts up 14bps. Our attention now turns to US housing data, China rates update and commentary from key Fed officials.

Expected Ranges

  • NZD/USD: 0.6150 - 0.6250 ▼
  • NZD/EUR: 0.5620 - 0.5720 ▼
  • GBP/NZD: 2.0480 - 2.0780 ▲
  • NZD/AUD: 0.9020 - 0.9120 ▼
  • NZD/CAD: 0.8150 - 0.8250 ▼