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NZD buoyed by softer USD and stubbornly sticky service led inflation
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Daily Currency Update
The New Zealand dollar outperformed through trade on Wednesday, extending back above US$0.59. Commodity currencies were well supported as currency markets ignored a broader risk-off mood and instead forced the USD lower amid a steady fall in treasury yields across the curve. While headline domestic CPI data printed in line with expectations, services and non-tradeable inflation remains elevated and too high for comfort, lifting domestic rates and the NZD. While inflation continues to track toward target, Wednesday’s print did little to prompt the RBNZ to bring forward its rate cut agenda. Having pushed back above US$0.59, the NZD traded toward intraday highs above US$0.5920 before steadying and edging marginally lower on open this morning.With little on the local ticket our attentions turn to Australian employment data, US jobless claims and key central bank commentary from Fed and ECB officials.
Key Movers
The euro was the day’s notable outperformer Wednesday up half a percent and back through 1.0650, marking session highs at 1.0670. European Central Bank President Christine Lagarde paved the way for the Euro advance, suggesting there were clear signs of a euro area recovery and that the Bank was closely monitoring the exchange rate and its potential impact on the euro and inflation. While euro bonds fell, US treasuries also retreated and markets appeared content in ignoring a broader risk-off tone, forcing the USD lower against most major counterparts. UK yields rallied after a stronger-than-expected UK CPI inflation print, driven by a surprise uptick in services inflation. While Governor Bailey suggested he expected a significant correction in next month’s numbers, market pricing for BoE policy change barely shifted with a first full cut not priced in until September, leaving August an outside chance should policymakers choose to move early. Sterling edged higher against the USD, pushing back above 1.2450, yet falling short of a break above 1.25.Our focus now turns to US jobless claims and commentary from key ECB and Fed officials.
Expected Ranges
- NZD/USD: 0.5880 – 0.5950 ▲
- NZD/EUR: 0.5500 – 0.5600 ▼
- GBP/NZD: 2.0900 – 2.1200 ▼
- NZD/AUD: 0.9120 – 0.9220 ▼
- NZD/CAD: 0.8100 – 0.8200 ▲
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