Home Daily Commentaries NZD recovers losses on weaker US headline inflation

NZD recovers losses on weaker US headline inflation

Daily Currency Update

The New Zealand dollar advanced through trade on Wednesday, recouping some of Tuesday’s losses to climb back above US$0.62 on the heels of weaker US inflation data.  The latest US CPI report showed a sharper than anticipated decline in annual inflation. Headline CPI rose by 0.1%, dragging the annual rate of inflation down to 5%, its lowest level in almost two years. While core inflation remains stubbornly sticky the sharp decline in headline price pressures was enough to drive US treasury yields and the USD lower. The NZD climbed off intraday lows near US$0.6180, punching back above US$0.62 to mark intraday highs at US$0.62400 before meeting resistance and edging lower into the daily open. The NZD currently buys US$0.6210 yet remains under pressure when valued against other major counterparts. Having fallen for a third consecutive day against the AUD, the NZD made fresh two-and-a-half-year lows against the Euro, sliding toward €0.5650 while failing to extend back above £0.50 against the Pound. Our attentions turn now to US jobless claims. With cracks appearing in the US labour market, we are watching for any sign of upward drift, particularly among recurring claims.

Key Movers

The US dollar fell against a basket of major counterparts following the latest monthly CPI update. The CPI report showed headline inflation declined at a faster pace than anticipated, dragging the annual rate of inflation to its lowest level in nearly two years. US treasury yields and the dollar fell sharply in the minutes immediately following the release, yet losses faded as markets began to dive in and digest the data. Despite a decline in headline price pressures, core inflation remains stubbornly sticky elevating calls for another Fed rate hike next month. The market remains wary of sustained inflation pressures even as the Fed narrative becomes more nuanced. A number of Fed speakers hit the wires on Wednesday and comments were mixed, with some voting members pointing to signs of economic slowdown and warning against overtightening while others clung to stubbornly high core inflation as a reason to continue raising rates. With the outlook somewhat more clouded, the Euro traded back above 1.09 and climbed toward 1.10 while the GBP looks set to punch above 1.25. Our attentions turn now to US jobless claims and PPI inflation ahead of an all-important retail sales print and consumer confidence update on Friday.

Expected Ranges

  • NZD/USD: 0.6150 - 0.6280 ▲
  • NZD/EUR: 0.5620 - 0.5720 ▼
  • GBP/NZD: 1.9880 - 2.0220 ▼
  • NZD/AUD: 0.9220 - 0.9320 ▼
  • NZD/CAD: 0.8280 - 0.8420 ▲