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NZD under pressure amid upswing massive upswing in US consumer spending

NZD - New Zealand Dollar

The New Zealand dollar broke below 0.72 US cents on Wednesday amid weakness across equities and a surprise uptick across key US data sets. Having tested supports through the last few sessions, the NZD extended toward intraday lows at 0.7160 after US retail sales surged 5.1% in January, well beyond the 1% uptick anticipated. The strong consumer showing was coupled by improvements in PPI inflation, industrial production and home sales, suggesting the US economy is fairing better than analysts first anticipated. Further divergence in US and NZ rates added additional pressure on NZD prompting a break below recent supports.

With little of note on today’s domestic docket, attentions remain with the broader market narrative. Higher US rates will further weigh on the NZD while the FOMC minutes will provide further insight in Fed policy expectations.

Key Movers

The dollar index advanced through trade on Wednesday up 0.3% following higher bond rates and stronger than anticipated domestic retail sales. Following a soft showing in December, consumer spending rebounded strongly in January up 5.1% month on month, well beyond the 1.1% growth anticipated and raising some concerns inflation pressures may accelerate as fiscal stimulus is introduced to the economy. The dollar advanced against both the GBP and euro driving the index higher. Sterling drifted below 1.39 and touched 1.3830 before settling above 1.3850 into this morning’s open. The euro slipped below 1.21 forced to lows at 1.2030. Europe remains behind the US and UK when comparing vaccination schedules while the stronger US macroeconomic showing highlighted the divergence in economic performance and growth expectations. Attentions now turn to the FOMC minutes and US unemployment claims ahead of tomorrow’s slew of Manufacturing and Services data across Europe and the US as key markers of underlying fundamental health.

Expected Ranges

NZD/USD: 0.7080 - 0.7250 ▼

NZD/EUR: 0.5920 - 0.6010 ▲

GBP/NZD: 1.9180 - 1.9430 ▼

NZD/AUD: 0.9240 - 0.9330 ▼

NZD/CAD: 0.9070 - 0.9160 ▼