New Zealand dollar opens slightly weaker against the greenback
Monday 24 January, 2022
Daily Currency UpdateAll eyes this week will be on the New Zealand quarterly Consumer Price Index (CPI) on Thursday. Investors have fully priced in the bulk of the Reserve Bank of New Zealand’s rate hikes in 2022, leaving the kiwi susceptible to further downside falls. While higher rates usually serve as a tailwind for a currency, the more aggressive rate outlook was already priced into the Kiwi Dollar, leaving it with less relative upside potential. Rates markets are pricing 157 basis points of RBNZ hikes this year. New Zealand’s fourth-quarter inflation data due January 27 is likely to confirm this stance as its forecast to jump to 5.8% year-over-year, which would be the highest since 1990.
New Zealand is preparing for Omicron to soon spread through its community. Prime Minister Jacinda Ardern said the community spread of Omicron through New Zealand would be impossible to prevent, but they will not go back into lockdowns. New Zealand boasts a vaccination rate of over 93% for those over 12 years old, including a booster rate north of 50%. That will likely help keep hospitalizations and deaths at a minimum once Omicron does permeate the border.
Looking ahead for the rest of this week and on Wednesday will see the release of monthly trade balance figures. On Friday, we will see the release of New Zealand consumer confidence. From a technical perspective, the New Zealand dollar is hovering above support at last year’s low of 67.04 U.S. cents. A breach of these levels would open the door to further kiwi weakness.
Key MoversLast week saw the Peoples Bank of China (PBOC) ease monetary policy by adding liquidity and cutting several key borrowing rates. A zero case Covid-19 policy concerning developments in their property sector prompted the action. This saw iron ore and other ferrous metals move higher. Energy commodities, gold, copper, and aluminium continue to trade at elevated levels, adding to Australian export dollars.
Looking ahead this week the US Federal Reserve will announce its decision on monetary policy on January 26. No action is expected at this time, although market participants are hoping for clearer hints about upcoming rate hikes. Investors are pricing in a first-rate hike for March 2022 and at least three hikes through the year. Also, the United States will publish the first estimate of Q4 Gross Domestic Product, foreseen at 5.8% QoQ, and December Durable Goods Orders. At the end of the week, the US will release the Core Personal Expenditures Price Index, the Fed’s favourite inflation measure.
- NZD/USD: 0.6650 - 0.6850 ▼
- NZD/EUR: 0.5800 - 0.6000 ▲
- GBP/NZD: 1.9980 - 2.0220 ▲
- NZD/AUD: 1.0550 - 1.0750 ▼
- NZD/CAD: 0.8350 - 0.8550 ▼