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Kiwi struggles to hold on to short term supports ahead of key inflation data

NZD - New Zealand Dollar

The New Zealand dollar fell through trade on Thursday slipping below support at 0.6750 as the USD found support in stronger than anticipated labour market and wholesale industry data. Having edged steadily lower in the wake of the RBNZ’s shift in Forward Guidance the kiwi appears vulnerable to a break of recent supports as a consolidated move below 0.6750 could force a break into lower ranges as support becomes resistance.

With little of note on the domestic docket, attentions turn to next weeks quarterly CPI print. An uptick in price pressures could help ease the burden/threat of an RBNZ rate cut while a soft read will all but sure up market expectations for a 25 basis point correction moving into the end of the year.

Key Movers

The US dollar advanced against most major counterparts on Thursday as labour market strength and improved PPI data assuaged investors’ concerns the economy is headed for a sharp slowdown. Unemployment claims fell to a near 50-year low last week, bolstering confidence in the labour market, while Producer Prices grew at their fastest pace in 5 months easing pressure on the Fed and downgrading the likelihood of a cut rates through the later half of the year. The dollar index moved back through 97 to trade at 97.17 at time of writing.

Sterling fell through trade on Thursday as investors grappled with the ramifications of a delay to the Brexit processes of up to six months. At an emergency summit EU leaders granted the UK a Brexit extension, postponing the official divorce date until October 31. The pound fell through 1.31 to touch intraday lows at 1.3053 while one-month volatility plunged to its lowest level since August. The extension and dip in implied volatility suggest Sterling will maintain recent ranges and continue to bounce between 1.29 and 1.32 as markets await clarity on when and how Britain will extricate itself from Europe.

Expected Ranges

NZD/USD: 0.6680 - 0.6830 ▼

NZD/EUR: 0.5920 - 0.6020

GBP/NZD: 1.9300 - 1.9500 ▲

NZD/AUD: 0.9400 - 0.9600 ▼

NZD/CAD: 0.8880 - 0.9050 ▼