Home » Daily Commentaries » Kiwi extends back above 0.70 following moderation in US inflationary pressure

Kiwi extends back above 0.70 following moderation in US inflationary pressure

Thursday 12 August, 2021

Daily Currency Update

NZD - New Zealand DollarThe New Zealand dollar outperformed through trade on Wednesday, extending beyond 0.7050 following a moderation in US consumer prices. Markets had been keenly attuned to last nights US CPI print, following Friday’s robust non-farm payroll report, and the moderation in price pressures across key marketplaces helped alleviate concerns the recent inflationary uptick may not be caused by transitory factors. Having tracked between 0.6990 and 0.7010 for much of the domestic session, the NZD powered toward intraday highs at 0.7060, before settling into a narrow handle centered around 0.7050. With little of note on today’s macroeconomic ticket we expect ranges will remain with the current handle, as resistance on moves approaching 0.71 US cents contains further upside. With markets eyeing next week’s RBNZ policy meeting and a possible rate hike, we expect price action across the rates and currency markets will be largely contained through the coming 7 days unless a headline event finally sparks some conviction of direction.

Key Movers

The US Dollar Index fell through trade on Wednesday following a moderation in Consumer price pressures and a robust US treasury auction. The US Consumer Price Index fell in July and at first glance afforded some hope that current pressures are indeed transitory. While a one-month moderation is not enough to declare a trend, it provides welcome relief from the massive uptick seen through April, May and June. The dollar was forced lower immediately following the data release and met added downside as a strong US treasury auction pushed yields lower. The Dollar Index fell 0.2% on the day, allowing the JPY, EUR, CAD and GBP all to enjoy overnight gains in region of 0.2-0.3%. Our attentions turn now to UK Q2 GDP data. With the economy starting to open up in the 3 months to June 30, we expect a robust print and significant uptick in quarter on quarter growth. A print above 5% could help spur sterling back above 1.39.

Expected Ranges

  • NZD/USD: 0.6980 - 0.7090 ▲
  • NZD/EUR: 0.5950 - 0.6030 ▲
  • GBP/NZD: 1.9590 - 1.9780 ▼
  • NZD/AUD: 0.9490 - 0.9580 ▲
  • NZD/CAD: 0.8760 - 0.8850 ▲