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Kiwi dollar remains under pressure at 70 cents

Monday 9 August, 2021

Daily Currency Update

The New Zealand dollar remained under selling pressure last week, closing out the week marginally lower towards 70 cents. Despite broad-based USD strength last week, the NZD was the top performer (+0.5%), courtesy of the upside to the NZ HLFS labour market report and ensuing repricing of the RBNZ OCR outlook. The Kiwi has been on a roll since the recent strong jobs data which has all but cemented expectations for a rate hike by the Reserve Bank of New Zealand on Aug. 18, which would be its first since mid-2014 and the first increase by any developed country since the pandemic hit and reflects the strength of the local economy and labour market. The cash rate is currently at a record low of 0.25%, following an emergency cut of 75 basis points early last year. On the data front this week in New Zealand the macroeconomic calendar is very light. There are no scheduled releases today. On Thursday we will see the release of Food Price Index (FPI) for the month of July. Along with the release of Inflation Expectations q/q which measures the percentage that business managers expect the price of goods and services to change annually during the next 2 years. On Friday we will see the release of Business NZ Manufacturing Index and Monthly Visitor Arrivals. From a technical perspective, the NZD/USD pair is currently trading at 0.7005. We continue to expect support to hold on moves approaching 0.6922 while now any upward push will likely meet resistance around 0.7060.

Key Movers

On Friday the greenback rallied on the back of an upbeat July nonfarm payrolls report. The US added 943K new jobs in July, while the unemployment rate dropped sharply from 5.9% to 5.4% (5.7% expected) and wage growth was stronger than expected, both largely beating the market’s expectations. The participation rate increased to 61.7% while broader measures of the labour market also improved, with the underemployment rate falling 0.6%, to a new post-Covid low of 9.2%. Looking ahead this week and the key release is the US CPI report on Wednesday which is expected to show some moderation in inflation pressures from previous months (although the year-on year rates of both headline and core inflation are expected to remain very high, at 5.3% and 4.3% respectively). The market will also be listening closely to the four Fed officials who are speaking this week, for any guidance on the possible timing for tapering in light of the upside surprise to payrolls.

Expected Ranges

  • NZD/USD: 0.6900 - 0.7100 ▼
  • NZD/EUR: 0.5850 - 0.6050 ▼
  • GBP/NZD: 1.9670 - 1.9870 ▲
  • AUD/NZD: 1.0370 - 1.0570 ▲
  • NZD/CAD: 0.8700 - 0.8900 ▼