Home Daily Commentaries NZD stagnant, unable to break back above 0.70 US cents

NZD stagnant, unable to break back above 0.70 US cents

Daily Currency Update

NZD - New Zealand Dollar

The New Zealand dollar edged higher through trade on Wednesday, dragged upward by persistent strength across commodity prices and a broadly weaker USD. Having drifted aimlessly through the domestic session the NZD fell to intraday lows at 0.6915 following the US CPI inflation print. Headline figures printed slightly above expectations and remain stubbornly above the Fed’s 2% target. A sharp uptick in wage prices fueled a surge in yields, dragging the greenback higher before markets looked to reverse gains and drive the USD lower. Recovering quickly the NZD jumped back through 0.6950, touching intraday highs at 0.6970 before levelling out into this morning’s open.

Uncertainty surrounding the domestic COVID-19 outlook and expectations for near term USD upside have handicapped the NZD, preventing a run back above 0.70 US cents. At face value, the currency remains undervalued and a break above technical resistance could help fuel a run higher, yet we expect a sustained period of volatility within set ranges as the market continues to seek a conviction in direction.

Key Movers

The US dollar appears poised to enjoy an extended upturn when valued against key counterparts having tested fresh highs against both the Japanese yen and euro this week. However, the world’s base currency gave up gains through trade on Wednesday as the euro edged back toward 1.16 and the pound punched through 1.3650. Markets largely ignored another uptick in US inflation data as inflationary pressures through September rose largely in line with expectations. CPI inflation remains well above the Fed’s 2% target and continues to drive expectations for a shift in Fed monetary policy. Despite a softening in the labour market, persistent stagflation and improving yield returns, particularly against the euro and yen, should underpin USD upside through the weeks and months ahead.

Our attentions today turn to PPI numbers and unemployment claims ahead of Friday’s retail sales report.

Expected Ranges

  • NZD/USD: 0.6880 - 0.7020 ▲
  • NZD/EUR: 0.5990 - 0.6050 ▼
  • GBP/NZD: 1.9480 - 1.9670 ▲
  • NZD/AUD: 0.9390 - 0.9470 ▲
  • NZD/CAD: 0.9390 - 0.8720 ▲