Home Daily Commentaries New Zealand dollar continues to trade below 64 US cents

New Zealand dollar continues to trade below 64 US cents

Daily Currency Update

The Kiwi dollar is weaker this morning when valued against the Greenback dropped during the last two days as global central banks rushed towards higher rates to tame inflation. Also exerting downside pressure on the pair could be the risk-negative headlines surrounding China. US President Joe Biden’s crackdown on Chinese chipmakers also weighed on the market sentiment and allowed the US Dollar to stay firmer. On Friday the Greenback was marginally stronger amidst the risk-off backdrop, with the two notable exceptions being the Japanese Yen and (surprisingly) the Kiwi. the Greenback appears to have found some support over the past week. The NZD/AUD pair has jumped up to 0.9534, now at its highest level in over a year.
On the local front on Friday we saw the release of the BusinessNZ Manufacturing Index. New Zealand’s manufacturing sector saw deeper levels of contraction in November, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI). The seasonally adjusted PMI for November was 47.4 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was 1.7 points lower than in October, and the first time the PMI has shown consecutive months of contraction since the first nationwide lockdown in 2020. Looking ahead this week and today we will see the release of the Westpac Consumer Sentiment and BusinessNZ Services Index. On Tuesday. we will see the release of Statistics New Zealand monthly Trade Balance figures and ANZ Business Confidence which is a leading indicator of economic health.

Key Movers

On Friday the Great British Pound struggled to capitalize on its modest intraday bounce from the 1.2120 after a dovish outcome from the Bank of England meeting on Thursday, with two MPC members voting to keep interest rates unchanged, undermines the GBP, which is further pressured by the disappointing UK macro data. The UK Office for National Statistics reported that domestic Retail Sales fell 0.4% in November and were down 5.9% YoY. Furthermore, sales excluding volatile auto and fuel dropped by 0.3% during the reported month, missing consensus estimates. The data fuels concerns that the economy has entered a prolonged recession and favours the GBP/USD bears.

In the United States on Friday S&P Global Services PMI declined to 44.4 in December's flash estimate from 46.2 in November. This print fell short of the market expectation of 46.8. Regarding the price pressure in the service sector, inflationary pressures in the service sector cooled notably in December, as input costs rose at the softest pace since October 2020. Further details of the publication revealed that the Composite PMI dropped to 44.5 from 46.4 in the same period. The US Dollar came under modest selling pressure on this report and the US Dollar Index was last seen posting small daily losses at 104.42. Off the back of the weaker-than-expected data US equities finished lower the S&P500 falling 1.1% and the NASDAQ down 1% with investors wary of the likely hit to corporate earnings if the economy slumps into a recession next year, as seems likely.

Expected Ranges

  • NZD/USD: 0.6250 - 0.6450 ▼
  • NZD/EUR: 0.5900 - 0.6100 ▼
  • GBP/NZD: 1.8900 - 1.9100 ▲
  • NZD/AUD: 1.0400 - 1.0600 ▲
  • NZD/CAD: 0.8600 - 0.8800 ▼