Home Daily Commentaries New Zealand dollar trades below 64 US cents

New Zealand dollar trades below 64 US cents

Tuesday 13 December, 2022

Daily Currency Update

The Kiwi dollar is slightly weaker this morning when valued against the Greenback. The Kiwi started the week in the 0.6390’s before pulling back from recent highs, but still remains firmly entrenched in the prevailing range. Price action from the October 13 low onwards has revered off-cycle lows, forming an aggressive uptrend, propelling the Kiwi to a four-month high a few pips above 0.6440, logged on December 5. The two catalysts for NZD’s near 17% recovery during this period – are evidence that inflation in the US has peaked and China’s pivot to more relaxed Covid protocols, paving the way for a full re-opening in 1H 2023. The NZDUSD pair is currently trading at 0.6383. On the data front yesterday New Zealand’s annual migration loss continues to shrink, although Kiwis are leaving faster than non-New Zealand citizens arrive. For the year ended October 2022, 15,100 New Zealand citizens left and 11,000 non-New Zealand citizens arrived. Monthly tourist numbers continued to rise with the borders now open, jumping 10,400 from September to 161,600 in October. Looking ahead today we will see the release of the NZ Food Price Index (FPI). Although food is among the most volatile consumer price components, this indicator garners some attention because New Zealand's major inflation data is released on a quarterly basis.  Tomorrow in New Zealand we will see the release of the Current Account which is directly linked to currency demand. A rising surplus indicates that foreigners are buying more of the domestic currency to execute transactions in the country.

Key Movers

All eyes will be on the US CPI data which will be released tonight, with the market looking for another 0.3% month-on-month reading for core inflation. Last month’s downside surprise to core inflation sparked a wave of optimism that US inflation might have peaked, leading to a pullback in Fed rate expectations and contributing to the surge in risk assets. US equities and other risk-sensitive assets have been in a holding pattern over the past few trading days, poised for a directional breakout should US CPI deviate from the consensus of an annualised core inflation rate of 6.4%, headline at 7.7%. The British Pound is firm on Monday within a bullish cycle that targets the 1.2400 area in what would be a measured move to the upside from the recent lows near 1.2100. GBPUSD will be in the limelight this week due to the Monetary Policy Committee (MPC) and Federal Open Market Committee (FOMC) meetings this week. We expect the Bank of England (BoE) to hike the Bank Rate by 50bp on December 16, bringing the official cash rate to 3.50%. In other news, UK Gross Domestic Product grew by 0.5% after September's 0.6% contraction, but fears of a lengthy UK recession are still weighing on sentiment.

Expected Ranges

  • NZD/USD: 0.6250 - 0.6450 ▼
  • NZD/EUR: 0.5950 - 0.6150 ▼
  • GBP/NZD: 1.9100 - 1.9300 ▲
  • NZD/AUD: 1.0450 - 1.0650 ▲
  • NZD/CAD: 0.8600 - 0.8800 ▼