Home Daily Commentaries NZD buoyed as US inflation pressures ease

NZD buoyed as US inflation pressures ease

Friday 13 January, 2023

Daily Currency Update

The New Zealand dollar climbed back toward US$0.64 through trade on Thursday, buoyed by easing US inflation pressures and a subsequent correction in Fed rate expectations. Having tracked sideways through the domestic session, the NZD climbed off intraday lows at US$0.6330, marking session highs just north of US$0.64, touching US$0.6412. US CPI inflation data printed in line with market expectations, with a stronger downturn in Core inflation pressures elevating calls the Fed should slow the pace of rate hikes in February and March before pausing to take stock of the recent program of monetary policy tightening. Having struggled to extend beyond US$0.64, the NZD has consolidated near this handle as our attentions shift now to US growth expectations and whether or not a H2 recession is avoidable. US consumer sentiment and the upcoming earnings season will provide a good insight into how robust the US economy is.

Key Movers

Overnight price action hinged on US inflation data and the subsequent reaction across the US rates market. US CPI inflation data showed price pressures continue to ease in the States, elevating calls for fed policy makers to slow the pace of rate hikes. We saw a sharp move in Fed fund pricing expectations, with most analysts now anticipating a 25-point rate hike in February, an assumption supported by commentary from some key Fed officials. The DXY dollar index gave up 0.7% in the wake of the data release, as most other majors enjoyed an upswing against the dollar. The Japanese yen was the day stand out, forcing the dollar back below 130 as rates action normalises. The Bank of Japan is considering adjusting its bond purchases amid tweaks to its Yield Curve Control program. Outside the yen, the euro climbed toward US$1.0850 while the GBP clawed back above US$1.22. Our attentions turn now to US earnings data and growth signals. As inflation pressures continue to ease, the growth outlook will be critical in shaping Fed policy through H2. The likelihood of a recession remains very real, and while the USD remains under pressure through the near term, a global recession should afford the world’s base currency some support as we move through 2023.

Expected Ranges

  • NZD/USD: 0.6320 - 0.6430 ▲
  • NZD/EUR: 0.5850 - 0.5950 ▲
  • GBP/NZD: 1.8980 - 1.9220 ▲
  • NZD/AUD: 0.9150 - 0.9250 ▼
  • NZD/CAD: 0.8480 - 0.8620 ▼