Home Daily Commentaries NZD/USD sees mild gains as USD battles hawkish market sentiment

NZD/USD sees mild gains as USD battles hawkish market sentiment

Monday 23 January, 2023

Daily Currency Update

The NZD/USD saw some gains during the Friday session pushing past 0.6400 which Kiwi bulls applauded for having aided in reversing the day’s losses and prepping to post a second straight weekly gain. The risk-taking attitude may have been related to expectations of more Chinese stimulus, especially in light of the People's Bank of China's (PBOC) fifth consecutive month of inactivity. Similarly, the Federal Reserve's rate raise trajectory may face obstacles due to unfavourable US statistics. The Philadelphia Fed Manufacturing Survey Index increased, and US Unemployment Claims fell to their lowest levels since late April 2022 with Building and Starts also failing to post positive readings. The New Zealand dollar side is not without its challenges at present, with Business NZD PMI and visitor arrivals declining in their most recent data postings. Overall, Friday was a positive day for the New Zealand dollar, having closed out the day at 0.6469, a 1.20% gain.

Key Movers

Improved risk sentiment helped lift commodity currencies through trade on Friday following a stronger than anticipated string of earnings data from Key US corporates. Earnings across the Tech sector helped fuel a rebound in equities while commentary from Fed speakers helped affirm expectations policymakers will slow the pace of rate hikes next week. The Fed is expected to issue a 25 point increase, pulling back from the 50 point hike issued in December as data sets suggest a slowdown in activity and a shift toward economic recession. With the AUD, NZD, and CAD leading gains into the weekly close the Euro and GBP looked to consolidate gains with the Euro closing above 1.0850 while Sterling looks poised to test a break above 1.24. In other news the Japanese yen was the day's worst performer, offering some support to the dollar index as it gave up 129 and allowed the USD to climb back above129.50 leading into the weekly close/ CPI data surged upward, marking 4% y/y, a fresh 40 year high. While the BoJ insists inflation is transitory there is mounting pressure to move away from expansionary policy and give up yield curve controls. With little of note on today’s macroeconomic ticket, our focus this week shifts to US advanced GDP data and the PCE index, as key measures of performance and inflation ahead of next week's Fed policy update.

Expected Ranges

  • NZD/USD: 0.6390 - 0.6470 ▲
  • NZD/EUR: 1.6977 - 1.6792 ▲
  • GBP/NZD: 1.9140 - 1.9380 ▼
  • NZD/AUD: 0.9245 - 0.9290 ▲
  • NZD/CAD: 0.8600 - 0.8675 ▲