New Zealand dollar remains steady below 63 US cents
Tuesday 21 February, 2023
Daily Currency UpdateThe NZ dollar is slightly stronger this morning when valued against the Greenback trading at US$0.6254 at time of writing. The NZDUSD pair attracted some buyers near the 0.6220 area on Monday and snapped a four-day losing streak to its lowest level since January 6. From a technical perspective, a sustained downside break of the 200-day Exponential Moving Average (EMA), around 0.6275 by the press time, keeps NZDUSD bears hopeful of breaking the three-month-old support line, close to 0.6220 at the latest. The NZDAUD cross dipped to a fresh four-month low below 0.9020 overnight and is currently back near 0.9050. Narrower NZ-Australia rate spreads have been behind the weaker cross this year and futures suggest more to come as the RBA plays catch-up with its rates cycle. Looking ahead on the data front, New Zealand's central bank will scale down its tightening campaign only slightly with a half-point interest rate hike to 4.75% on Wednesday as inflation is still running at a near three-decade high. That puts the Reserve Bank of New Zealand (RBNZ) one of the first among major central banks to start withdrawing pandemic-era stimulus, roughly in line with its peers, which are shifting to smaller rate increases after a historic rapid-fire series of moves. The RBNZ has already raised rates by a total of 400 basis points since October 2021. It will likely get to at least 500, with a peak of 5.25% or higher expected by mid-year by just over half of respondents, slightly below the RBNZ's own projected terminal rate of 5.50%. On Wednesday, Statistics New Zealand will also release monthly trade balance figures. Export demand and currency demand are directly linked because foreigners must buy domestic currency to pay for the nation's exports. Export demand also impacts production and prices at domestic manufacturers.
Key MoversThere were no scheduled releases in the US overnight as they celebrated Presidents' Day or officially Washington's Birthday. Last week the bets were reaffirmed by the US CPI and PPI data, which showed that inflation isn't coming down quite as fast as hoped. Moreover, several FOMC officials recently stressed the need to keep lifting rates gradually to fully gain control of inflation. The markets seem convinced that the US central bank will stick to its hawkish stance and have been pricing in at least a 25 bps lift-off at the next two FOMC meetings in March and May. The prospects for further policy tightening by the Fed continue to act as a tailwind for the US dollar. The Great British pound corrected from the low 1.19s on Friday, denting the bear's dominance ahead of a US holiday on Monday as traders squared up into the long weekend. At the time of writing, GBPUSD is trading near 1.2050 and remains in consolidation between the day's low of 1.2014 and 1.2056. Looking ahead in the UK this week the PMI for February is the pick of the UK data calendar tomorrow. We forecast a modest improvement to 49.2. This may not be enough to lift GBPUSD, with investors instead bracing for the FOMC minutes and US PCE inflation.
- NZD/USD: 0.6150 - 0.6350 ▲
- NZD/EUR: 0.5750 - 0.5950 ▲
- GBP/NZD: 1.9150 - 1.9350 ▼
- NZD/AUD: 1.0950 - 1.1150 ▼
- NZD/CAD: 0.8300 - 0.8500 ▲