NZD driven downward as US CPI print rocks market
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Daily Currency Update
The New Zealand dollar tumbled through trade on Tuesday after a stronger-than-anticipated US CPI inflation report rocked markets. Equities plunged and US yields surged upward as markets pushed back the timing and trajectory of US rate hikes after headline and core CPI for January rose more than expected leaving the annual rate unchanged at 3.9%. The USD shot upward and the NZD crashed back through US$0.61 marking fresh year-to-date lows near US$0.6050 as markets extinguished hopes for a rate cut next month and pared back expectations for any policy change before June. After outperforming and marking highs just short of US$.6400 in December the NZD has been one of the worst performing majors of 2024. The rapid correction in US yields and shift in US monetary policy expectations continue to drive direction. The longer the Fed can maintain its current footing the longer the timeline for any meaningful NZD recovery.Key Movers
The USD surged through trade on Tuesday, buoyed by a stronger-than-anticipated January CPI report. Both headline and Core CPI rose at a faster rate than markets anticipated up 0.1 and 0.2% respectively prompting a 0.4% uptick in month-on-month inflation pressures and a no change in the annual rate of inflation from December. The print shocked markets and forced analysts to push back the timing and trajectory of US rate cuts. Any hope of a rate cut in March has all but been extinguished while pricing for a May rate adjustment has been pared back significantly. US treasury yields are higher across the curve with both 2 and 10-year rates up over 10 basis points marking year-to-date highs, while equities plunged as hopes of cheaper funding and looser financial conditions faded. The DXY index is up 0.6% with the euro plunging toward US$1.07 and the JPY giving up ¥150. The GBP was the only major to offer any resistance, giving up only a fraction of the ground when compared with key counterparts. Stronger than anticipated labour markets date and persistent wage inflation saw pricing for a Bank of England rate cut pushed back from August to September. Our attention now turns to UK CPI Data and Euro area GDP, both key indicators driving central bank expectations through the near term.Expected Ranges
- NZD/USD: 0.6020 - 0.6150 ▼
- NZD/EUR: 0.5600 - 0.5700 ▼
- GBP/NZD: 2.0600 - 2.0900 ▲
- NZD/AUD: 0.9350 - 0.9430 ▲
- NZD/CAD: 0.8180 - 0.8250 ▼