NZD tumbles as domestic inflation pressures ease
Friday 21 April, 2023
Daily Currency UpdateThe New Zealand dollar appears set to close the week below US$0.62 following a much softer than anticipated CPI inflation print. Domestic Q1 CPI data surprised to the downside, a welcome relief for RBNZ officials. Headline inflation rose just 1.2% through the quarter dragging annual inflation below 7% to 6.7%, well below initial market estimates. While still much too high for comfort and well above target there are now clear signs suggesting inflation has peaked, allowing investors to price in a final 25 basis point rate hike in May, before preparing for an eventual loosening of monetary policy conditions. The NZD tumbled off intraday highs at US$0.6205 in the moment immediately following the data release, giving up 50 points to mark session lows of US$0.6150, before tracking sideways through the rest of the local session. The NZD then set about recovering the days earlier losses, crawling back toward US$0.62 following softer second tier US data and a broadly weaker USD.
Our attentions turn now to a host of European and US service and manufacturing data drops. Globally, service activity continues to operate in expansionary territory, while manufacturing sectors are offering contractionary signals. We are keenly attuned to US PMI updates as a key measure in driving near-term rate expectations.
Key MoversThe US dollar tracked lower through trade on Thursday after weaker than anticipated second tier data. Philadelphia’s Fed Business outlook survey fell eight points to its lowest level since the outbreak of the pandemic. After stronger than anticipated New York manufacturing activity earlier this week, the softer print highlights just how volatile and regionalised these surveys are. Having tracked lower the USD extended the downturn after Jobless claims pushed higher. Rising first time jobless claims were coupled with an uptick in continuing jobless claims, a worrying sign for the labour market. Some 33% of US States have reported jobless claims more than 30% higher than this time last year, a clear signal the US economy is running headlong toward recession. With the USD weaker, the euro consolidated its peak above 1.0950, while the GBP held above 1.24 and the JPY outperformed amid a lower global rates backdrop.
Our attentions turn now to global PMI data updates.
- NZD/USD: 0.6120 - 0.6250 ▼
- NZD/EUR: 0.5580 - 0.5680 ▼
- GBP/NZD: 1.9880 - 2.0220 ▲
- NZD/AUD: 0.9120 - 0.9250 ▼
- NZD/CAD: 0.8250 - 0.8350 ▼