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Kiwi stronger today ahead of Q2 inflation report

NZD - New Zealand Dollar

The New Zealand dollar is stronger this morning when valued against the Greenback with the kiwi pushing higher early yesterday on buying pressure and the positive monthly China indicators. The NZD met some technical resistance at 0.6735 last night and currently sits around 0.6720. On the data front yesterday we saw the release of monthly New Zealand Visitor Arrivals. In the month of May we saw 219,300 visitor arrivals and 235,200 New Zealand resident arrivals. May is typically a quiet month for international travel to New Zealand. The fall in visitor arrivals was driven by decreases in arrivals from China (down 2,800) and India (down 1,900) compared with May 2018.

Looking ahead today on the release front and all attentions turn to NZ Q2 inflation report where expectations are for a jump to 1.7% from 1.5%. The range for the headline rate is 1.6-2.1%, suggesting there is a risk of an upside surprise. The release will also be key to the near-term outlook for the Reserve bank of New Zealand monetary policy. As it stands, money markets have attached a 73% likelihood of a 25bps cut to the official cash rate at the August 7th meeting. From a technical perspective, the NZD/USD pair is currently trading at 0.6718. We continue to expect support to hold on moves approaching 0.6680 while now any upward push will likely meet resistance around 0.6740.

Key Movers

Currency movements overall were fairly modest on Monday ahead of major central bank policy decisions next week. The U.S. Federal Reverse is expected to cut interest rates at next week’s policy meeting by 25 basis points and make another cut in September. The European Central Bank (ECB) also holds a meeting next week, with investors expecting a dovish statement. Money markets have priced in an ECB rate cut of 10 basis points in September and another one in March. The ECB’s meeting on July 25 may reinforce those expectations.

The British pound fell back towards six-month lows against the Greenback on Monday after a run of poor economic data and continued Brexit concerns. Looking ahead today in the UK and we will release of their latest employment data. The ILO unemployment rate for the three months to May is expected to remain steady at 3.8%. The number of unemployed people is expected to have decreased to 18.9K in June from 23.2K in the previous month. From a technical perspective, the GBP/USD pair is currently trading at 1.2518 . We continue to expect support to hold on moves approaching 1.2500 while now any upward push will likely meet resistance around 1.2550.

Expected Ranges

NZD/USD: 0.6650 - 0.6850 ▲

NZD/AUD: 0.9450 - 0.9650 ▼

GBP/NZD: 1.8500 - 1.8700 ▼

NZD/EUR: 0.5850 - 0.6050 ▲

NZD/CAD: 0.8650 - 0.8850 ▲