Home Daily Commentaries New Zealand dollar holding above the 61 US cents

New Zealand dollar holding above the 61 US cents

Daily Currency Update

The New Zealand dollar continues to hold above 0.61 but currency markets overall show modest net movements. The NZD/USD pair attracted some dip-buying on Friday and climbed back above the 0.6100 mark during the early European session. The NZD/USD pair closed the Friday session trading near the daily high, around the 0.6130 mark, and might now be looking to build on the overnight late rebound from over a two-year low. Last week New Zealand's central bank delivered its sixth straight interest rate rise on Wednesday and signalled it remained comfortable with its planned aggressive tightening path to restrain runaway inflation. The Reserve Bank of New Zealand (RBNZ) raised the official cash rate (OCR) by 50 basis points to 2.5%, a level not seen since March 2016.

Looking ahead this week and on Monday we will see the release of the Business NZ Services Index and quarterly Consumer Price Index (CPI). Consumer prices account for a majority of overall inflation. New Zealand has been a front-runner among central banks in withdrawing pandemic-era stimulus, the RBNZ has moved hawkishly to curb inflation, which was 6.9% in the first quarter, the highest rate in three decades. The cash rate is up tenfold from a record low of 0.25% in October. On Thursday we will see the release of NZ Trade Balance and Credit Card Spending.

Key Movers

On Friday the US Department of Commerce reported that US Retail Sales rose by 1% YoY, exceeding expectations of 0.8%, and also left behind May’s dismal reading of -0.3%. The University of Michigan Consumer Sentiment came better than expected, with the index toping 51.1 vs. 49.9 estimated. The positive in the report is that inflation expectations tempered, with consumers seeing inflation at 2.8% over a 5-year horizon, lower than 3.1% in June.

US Stocks rallied on Friday in response to a new round of bank earnings and promising economic data as fears of a 100 basis point rate hike from the Federal Reserve to subdue rising inflation subsided. The Dow Jones Industrial Average rallied 658.09 points, or 2.15%, to settle at 31,288.26. The S&P 500 jumped 1.92% to 3,863.16, and the Nasdaq Composite bounced 1.79% to 11,452.42. Despite Friday’s rally, all the major averages closed out the week with losses. The Dow slipped close to 0.2% while the S&P and Nasdaq fell 0.9% and nearly 1.6%, respectively.

Expected Ranges

  • NZD/USD: 0.6050 - 0.6250 ▼
  • NZD/EUR: 0.5950 - 0.6150 ▼
  • GBP/NZD: 1.9100 - 1.9300 ▲
  • NZD/AUD: 1.0850 - 1.1050 ▼
  • NZD/CAD: 0.7900 - 0.8100 ▲