New Zealand dollars hits four week low as markets pare rate cut expectations
Daily Currency Update
The New Zealand dollar extended losses through trade on Wednesday as market appetite for risk faltered and US yields surged. Risk sentiment soured through Asian trade amid growing concern for the state of the Chinese economy. Data releases were mixed. Domestic stocks fell as the pace of annual growth failed to keep up with forecasts and further highlighted the challenges China faces in a post-pandemic environment. The risk-off mood sent the NZD toward session lows near US$0.6120 while an extension in the risk-off shift prompted an extension in the sell-off overnight. The NZD broke below supports at US$0.61 to touch session lows at US$0.6091, its lowest level in four weeks. Markets continue to pare expectations for US rate hikes allowing US yields to recoup losses suffered through December. With the DXY on the front foot, we expect the NZD will continue to face sustained near-term pressures. Our attentions turn to date to NZ CPI data.Key Movers
The US dollar continues to outperform major counterparts as investors are forced to pare back expectations for rate cuts. Policymakers continued to push back against near-term easing, while local data dented hopes of any shift in policymakers' outlook. US retail sales increased through December, comfortably surpassing market estimates and underlying greater-than-anticipated consumer resilience. Market pricing for a March rate cut has retracted dramatically with analysts now evenly split as to whether the Federal Reserve will move early, down from 80% just last Friday. The shift in rate cut pricing has seen an extension in US yields and allowed the DXY index to recover 3% since the late December low. With the euro and the yen lower, the GBP showed some resilience and was the best-performing G10 currency following inflation data. UK inflation picked up in December. The first increase in 10 months, sparking concerns the Bank of England will be forced to maintain tighter conditions for longer, extending bets as to when policymakers will start cutting rates.Our attention remains on global rates and yields ahead of next week's Bank of Japan and European Central Bank policy updates.
Expected Ranges
- NZD/USD: 0.6050 - 0.6200 ▼
- NZD/EUR: 0.5580 - 0.5680 ▼
- GBP/NZD: 2.0550 - 2.0850 ▲
- NZD/AUD: 0.9280 - 0.9350 ▲
- NZD/CAD: 0.8200 - 0.8300 ▲