Daily Currency Update

Get access to our expert daily market analyses and discover how your currency has been tracking with our exchange rate tools

NZD outpaces counterparts as domestic labour market data all but guarantees RBNZ rate hike

NZD - New Zealand Dollar

The New Zealand dollar opens stronger this morning having held on to Tuesday’s RBNZ led gains despite the USD upside overnight. The NZD closed as the top performer across major currencies, enjoying steady gains not only against the USD but key crosses, the AUD and JPY. Domestic labour market data showed strong gains in employment growth, labour force participation and declining unemployment rates, suggesting wage inflation may finally start catching up with broader price increases. This latest print provides further evidence the domestic economy is overheating fast amid ongoing stimulus and only adds to the recent appreciation in CPI inflation. All in all, Wednesday’s domestic labour market data drop essentially ensures the RBNZ will raise rates later this month, the first step in the long march back toward monetary policy normalisation. Having touched intraday highs at 0.7090 through the early hours of the overnight session the NZD gave back some of the day’s gains amid broad-based USD strength, following a record ISM services PMI print. Slipping back below 0.7050 the NZD opens buying 0.7041 US Cents.

Key Movers

The US dollar advanced against most counterparts on Wednesday, buoyed by a record high ISM services PMI report. Having come under pressure following weaker than expected leading employment data the USD rebounded strongly as the measure of service sector performance printed well beyond expectations. A 7-point gain in business activity and an uptick across demand for new orders and employment helped fuel expectations the US economic recovery remains on track despite the challenges presented by the COVID-19 Delta variant. A deep dive into the monthly print showed shortages in the supply of input goods, labour and extended delivery times which continue to add to the rising costs of service suggesting transitory inflationary pressures will not abate in the near term. The stronger than anticipated print coupled with hawkish commentary from Fed policymaker Richard Clarida helped fuel USD gains through the latter half of the overnight session, propping up the dollar index and driving a 0.2% gain on the day.

Both the euro and pound gave up ground on the day slipping below 1.1850 and 1.39 respectively. Our attentions turn now to tonight’s Bank of England policy meeting. We will be keenly attuned to any significant change in economic forecasting, but anticipate policymakers will refrain from adjusting the current policy setting. All in all the market will likely continue to bounce within the week's well-defined ranges ahead of Friday’s non-farm payroll print.

Expected Ranges

NZD/USD: 0.6980 - 0.7120 ▲

NZD/EUR: 0.5910 - 0.6020 ▲

GBP/NZD: 1.9590 - 1.9830 ▼

NZD/AUD: 0.9470 - 0.9590 ▲

NZD/CAD: 0.8790 - 0.8920 ▲