NZD struggles to continue as US dollar marks fresh highs
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Daily Currency Update
The New Zealand dollar consolidated Friday’s sell-off through trade on Monday, tracking a narrower range around US$0.5550. With the US dollar firming amid diminished expectations for extensive Fed rate cuts and an uptick in US treasury yields, the NZD extended its recent decline, marking fresh 2-year lows. With the domestic economy mired in recession, US rate expectations shifting and uncertainty surrounding the state of global trade weighing on markets, we see little respite for the NZD through the near term.President-elect Donald Trump continues to pontificate on tariffs and promises to shake up global trade and geopolitical relationships. We are keenly attuned to policy announcements through the early days and weeks of his second term as President as critical markers guiding NZD direction through Q1.
Key Movers
The US dollar advance continued through trade on Monday, fuelled by a rebalancing in Fed rate expectations and a surge in US treasury yields. Markets extended Friday's post-non-farm payroll move into trade on Monday, recalibrating expectations for Fed rate cuts through 2025. There is now just one 25-point rate cut priced through the end of the year, marking an incredible about-turn and driving an extended uptick in US treasury yields.Ten-year yields jumped to 4.79%, a 14-month-high, on Monday fuelling USD gains against all majors. In contrast, commentary from the European Central Bank chief economist suggested growth across the EU will undershoot expectations as nearly 1% of rate cuts are priced in through 2025. The divergence in policy between the US and EU is weighing on the euro and prompted a move below 1.02 overnight. The question now will we see a move toward parity?
Our attention now turns to commentary from central bank officials, in particular, a speech from the Bank of Japan’s deputy Governor as we seek any hint policymakers are lining up a rate hike later this month.
Expected Ranges
- NZD/USD: 0.5520 - 0.5620 ▲
- NZD/EUR: 0.5400 - 0.5500 ▲
- GBP/NZD: 2.1800 - 2.2000 ▼
- NZD/AUD: 0.9000 - 0.9100 ▼
- NZD/CAD: 0.7950 - 0.8050 ▲