Home Daily Commentaries New Zealand dollar trades below 58 US cents

New Zealand dollar trades below 58 US cents

Daily Currency Update

The New Zealand dollar is weaker this morning when valued against the greenback. The Kiwi dollar broke resoundingly below a notable level of technical support around 0.60 against the U.S. Dollar early last week and by Wednesday had given up the 0.59 handle. The NZD/USD pair slipped 2.2% last week, with the kiwi declining by 4.3% in the month of September. Seemingly leaving the NZD/USD exchange rate vulnerable to further declines. The New Zealand dollar is staggering from the double blow of an aggressive Federal Reserve and risk sentiment sliding due to ominous developments in Russia. As fears for a global recession edge ever closer the outlook for risk currencies such as the New Zealand dollar looks grim. The NZD/USD pair is currently trading at US$0.5744.

Looking ahead this week and on Wednesday we will see the release of the ANZ Business Confidence a leading indicator of economic health which survey’s about 1,500-2,000 businesses and asks respondents to rate the relative 12-month economic outlook. On Thursday the Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr is due to participate in a panel discussion in Lithuania to discuss the central bank independence in the face of fiscal dominance risks, expanding central bank mandates, and other challenges. On Friday Statistics New Zealand will release the Building Consents for the month. A leading gauge of future construction activity.

Key Movers

On Friday in the United States, the data published by S&P Global showed that the business activity in the US manufacturing sector expanded at a stronger pace in early September than in August with the Manufacturing PMI rising to 51.8 from 51.5. This reading came in better than the market expectation of 51.5. Further details of the monthly publication revealed that the Services PMI rose sharply to 49.2 from 43.7 and the Composite PMI improved to 49.3 from 44.6. Last Wednesday the Federal Reserve raised its benchmark interest rate by three quarters as expected. Federal Reserve chairman Jerome Powell vowed to bring inflation down and restore price stability. The Federal Reserve’s rate hikes and tough talk on inflation are supporting the U.S. Dollar Index for now. But rising joblessness, falling manufacturing activity, slumping home sales, and disappointing GDP numbers in coming reports could signal a hard landing for the economy. That would effectively force central bankers to back down.

The Bank of England announced on Thursday a 50 bps rate hike. Five members of the Monetary Policy Committee voted for that decision, three members wanted a 75 bps hike, and one member a 25 bps hike. The decision reflects a very uncertain economic outlook. On Friday the pound suffered the worst decline since at least March 2020, with GBP/USD losing more than 300 pips. Having recovered toward 1.1100 earlier in the session, GBP/USD turned south in the American session and touched its lowest level since 1985 below US$1.0900. The GBP/USD pair is currently trading at US$1.0816 (0.9246).

Expected Ranges

  • NZD/USD: 0.5650 - 0.5850 ▼
  • NZD/EUR: 0.5850 - 0.6050 ▲
  • GBP/NZD: 1.8750 - 1.8950 ▼
  • NZD/AUD: 1.1250 - 1.1450 ▼
  • NZD/CAD: 0.7700 - 0.7900 ▲