Home Daily Commentaries New Zealand dollar continues to trade above US$0.62

New Zealand dollar continues to trade above US$0.62

Daily Currency Update

The New Zealand dollar is stronger this morning when valued against the US dollar. NZD/AUD dropped nearly a cent after yesterday afternoon’s Reserve Bank of Australia (RBA) hike to around $0.9230 before recovery ensued. A positive GDT dairy auction overnight (prices up 2.5%) added support. NZD/AUD is not far from pre-RBA levels back above $0.93 on open this morning. The NZD/USD pair has scaled above the critical resistance of US$0.6220 as Statistics NZ has reported better-than-projected Employment data (Q1). The Employment Change has landed at 0.8% higher than the consensus of 0.4% and the former release of 0.2%. While the Unemployment Rate has remained steady at 3.4% as reported in the previous quarter but lower than the estimates of 3.5%. Quarterly Labor Cost Index data accelerated at a pace of 0.8% lower vs. the estimates and the prior release of 1.1%. The annual Employment Cost Index has landed lower at 4.5% from the expectations of 4.6% but higher than the former release of 4.3%.

Looking ahead today and the Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr is due to hold a press conference about the Financial Stability Report, in Wellington. Volatility is often experienced during his speeches as traders attempt to decipher interest rate clues. Investors should note that RBNZ Governor Adrian Orr pushed its Official Cash Rate (OCR) higher surprisingly by 50 basis points to 5.25% in April to strengthen its defence against persistent inflation. On Thursday we will see the release of the monthly change in Building Consents and the release of the Australia and New Zealand Banking Group (ANZ) Commodity Price Index.

Key Movers

Overnight the pound (GBP) lost some ground against the US dollar (USD) spurred by risk aversion amidst growing fears that the banking crisis in the United States (US), while the US debt ceiling theme, take the spotlight ahead of the Federal Reserve (Fed) decision. First Republic’s failure is the second largest in US banking history, beaten only by the 2008 demise of Washington Mutual which was also seized by the Federal Deposit Insurance Corporation (FDIC) and sold to JP Morgan. The failure of First Republic follows that of Silicon Valley Bank (SVB) and Signature Bank. The sequence has prompted concerns about a repeat of the contagion that characterised the global banking crisis. The takeover of the troubled lender by JP Morgan suggests the Federal Reserve is much more likely to hike rates at its meeting concluding Wednesday. The US dollar is still supported by high-than-expected PCE inflation data. From a technical perspective, the GBP/USD pair continues to pull back from new year-to-date highs in the US$1.2580s formed on April 28, currently trading at US$1.2477, though the overarching trend remains bullish.

Expected Ranges

  • NZD/USD: 0.6100 - 0.6300 ▲
  • NZD/EUR: 0.5550 - 0.5750 ▼
  • GBP/NZD: 1.9925 - 2.0125 ▲
  • NZD/AUD: 1.0600 - 1.0800 ▼
  • NZD/CAD: 0.8400 - 0.8600 ▲