NZD retreats in face of stronger USD
Daily Currency Update
The New Zealand dollar, while giving up ground against the USD has outperformed other majors namely the AUD and euro while offering only modest losses against the yen and GBP. A broadly stronger USD has pushed the NZD back below US$0.6150 and toward intraday lows just south of US$0.6130 as our attention now turns to US labour market data. ADP private payrolls will afford some insight into Friday's full non-farm payroll print and with JOLTS job openings adding to a sustained labour market softening analysts are looking for a print that supports an easing in monetary policy through 2024. Softer US data should help support the NZD track within a higher range between US$0.60 and US$0.64.While down against the USD, the NZD is modestly higher against the AUD, up above A$0.9350 and is slightly stronger against the euro, pushing back toward US$0.57. Our attention now turns to Australian Q3 GDP data, US private payrolls and a Bank of Canada policy update.
Key Movers
Against a backdrop of lower global rates, the USD outperformed, while the euro was the poorest performing Major and the GBP continued to relinquish gains hard won through November. Dovish commentary from European Central Bank (ECB) policy maker Schnabel prompted a correction in European yields and drove the euro back below US$1.08. Schnabel, traditionally a hawk, noted that underlying inflation was falling at a faster rate than anticipated and that another rate hike was “rather unlikely”. While she stopped short on being drawn into when the ECB may cut rates, she did offer some insight into policy makers timelines stating, “We should be careful making statements about something that is going to happen in six months’ time”. The suggestion that the ECB will cut rates within 6 months emboldened investors and as yields fell equities rose. Analysts are now pricing a near 90% chance of a 25-basis point rate cut as early as March with 150 points cut from the official cash rate through next year. With US domestic data mixed our attention now turns to Friday’s non-farm payroll print. Softening labour market conditions will support the view that the Fed need not tighten rates again and monetary policy can begin to ease through next year. Given the markets’ sensitivity to Fed rate guidance, we expect volatility into the end of the week.Expected Ranges
- NZD/USD: 0.6080 - 0.6220 ▼
- NZD/EUR: 0.5630 - 0.5730 ▲
- GBP/NZD: 2.0400 - 2.0700 ▲
- NZD/AUD: 0.9280 - 0.9380 ▲
- NZD/CAD: 0.8300 - 0.8400 ▼