Home Daily Commentaries New Zealand dollar trades below 62 US cents

New Zealand dollar trades below 62 US cents

Daily Currency Update

The Kiwi dollar is weaker this morning when valued against the Greenback. The Kiwi dollar was one of the weaker performers ending the week below 0.6200 and underperforming on the cross rates which saw the Trade Weighted Index fall close to 1.5% over the course of the week. The week is ending on a high note for policy makers at the Reserve Bank of New Zealand. Inflation Expectations for the first quarter eased to 2.79%, down from 3.30% in Q4 of 2022. This marked a second straight deceleration and the first time inflation expectations have fallen below 3% in six months. The soft reading has pushed the New Zealand dollar sharply lower on expectations that the RBNZ might ease up on its rate hikes. New Zealand inflation is at 6.7% on-year, not too far from the three-decade highs of 7.3% hit in Q2-2022, NZ jobs market, including wage growth, is still strong.

Looking ahead on the local data front in New Zealand and on Monday we will see the release of the BusinessNZ Services Index a survey of purchasing managers which asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories. On Thursday all eyes will be on the Treasury New Zealand Annual Budget Release. This document outlines the government's budget for the year, including expected spending and income levels, borrowing levels, financial objectives, and planned investments. On Friday we will see the release of the both the monthly Trade balance figures and Credit Card spending.

Key Movers

Data released in the US on Friday saw Consumer sentiment has deteriorated in early May with the University of Michigan's (UoM) Consumer Confidence Index falling to 57.7 (preliminary) from 63.5 in April. This reading came in below the market expectation of 63. This likely reflects higher gas prices through April (which have now moderated) and lingering concerns about the banking stress. Consumer sentiment tumbled 9% amid renewed concerns about the trajectory of the economy, erasing over half of the gains achieved after the all-time historic low from last June. Inflation expectations for one year dropped from 4.6% to 4.5% in May. On the contrary, 5-year inflation expectations rose from 3.0% to 3.2%, the highest reading since 2011.
In the UK Britain's economy grew sluggishly in early 2023, better than the shallow recession once expected, but an unexpectedly sharp drop in output in March underscored how fragile its recovery remains. Gross domestic product (GDP) edged up 0.1% in the first three months of the year, official data showed on Friday, the same tepid pace as in the final quarter of 2022. But GDP in March alone dropped 0.3%, compared with poll forecasts for it to hold steady. While industrial output and construction grew, the much larger services sector dropped 0.4%, reflecting weak car sales and retail, hurt by unusually rainy weather and high inflation. The Pound Sterling (GBP) continues bleeding lower against the US Dollar (USD) following weakness triggered by last week's Bank of England (BoE) monetary policy meeting. Headline inflation in the UK is at 10.1% which is more than double the 4.9% reading in the US. US and UK Core inflation is more similar, however, with the US at 6.2% versus 5.5% in the UK. Nevertheless, it suggests the UK will have to continue raising rates after the Federal Reserve (Fed) has stopped.

Expected Ranges

  • NZD/USD: 0.6100 - 0.6300 ▼
  • NZD/EUR: 0.5600 - 0.5800 ▼
  • GBP/NZD: 2.0000 - 2.0200 ▲
  • NZD/AUD: 1.0600 - 1.0800 ▼
  • NZD/CAD: 0.8300 - 0.8500 ▲