Home Daily Commentaries NZD outperforms as attentions turn to key inflation updates

NZD outperforms as attentions turn to key inflation updates

Daily Currency Update

The New Zealand dollar was a notable outperformer though trade on Tuesday advancing back above US$0.62 amid weaker than anticipated US macroeconomic data sets and general month-end rebalancing. Having maintained a narrow 20-point range through much of the domestic session the NZD climbed off intraday lows at US$0.6140, advancing overnight to mark session highs just shy of US$0.6210. US consumer confidence fell to its lowest level in seven months while Chicago PMI activity edged downward, and the goods trade balance widened. Softer US data helped lift the NZD off year to date lows and appear to have offered at least a short term modicum of support. The NZD was one of the worst performing major currencies in February as fears monetary policy will remain restrictive for longer were exacerbated. With few signs global central banks will be afforded the conditions to loosen policy expectations, we imagine the NZD will continue to face near term headwinds through March.

Our attentions today turn to China PMI activity, German and Australian CPI data, and US ISM manufacturing surveys.

Key Movers

European inflation woes dominated direction through trade on Tuesday as French and Spanish CPI both rose at a faster pace than anticipated. The data suggests increased risk of an upside surprise in German price pressures and an uplift in broader euro area inflation. With inflation stubbornly refusing to yield to successive monetary policy adjustments, markets were forced to amend rate expectations lifting European yields and dragging US rates higher overnight. With 10-year rates approaching 4%, markets stepped in to defend key resistance handles as consumer confidence waned and broader macroeconomic activity continues to falter. The euro tested a break above 1.0640 before retracing gains late, while the GBP looked set to consolidate a break above 1.21 before retreating. Amid the higher rates backdrop the JPY continues to underperform, and the USD tested 137 before settling back nearer 136.20 on open this morning.

With direction driven by inflation and monetary policy expectations our attentions today turn to German and Australian CPI data and US ISM manufacturing surveys.

Expected Ranges

  • NZD/USD: 0.6120 - 0.6220 ▲
  • NZD/EUR: 0.5780 - 0.5880 ▲
  • GBP/NZD: 1.9320 - 1.9680 ▼
  • NZD/AUD: 0.9130 - 0.9230 ▲
  • NZD/CAD: 0.8340 - 0.8480 ▲