NZD buoyed as global reflation narrative extended
Daily Currency Update
The New Zealand dollar outperformed through trade on Monday, consolidating a beak above US$0.60, as markets extended last week's reflation narrative. An absence of a new catalyst to perturb direction allowed the NZD to climb 0.3% to intraday highs at US$0.6035, buoyed by an extension in key commodity prices and a stronger Chinese yuan.Signs the global economy is recovering faster than expected have helped bolster demand for risk assets and the NZD, countering gains in US treasury yields and tempering USD demand. Our attention turns to NZIER’s quarterly survey of business conditions and opinion. It will prove a key marker on economic activity and spare capacity ahead of the RBNZ policy update tomorrow and US CPI data tomorrow night.
Key Movers
Price action has been well contained through trade on Monday as markets look to extend last week's themes in the absence of new catalysts that might otherwise disrupt direction. US treasury yields marked fresh year-to-date highs and the likelihood of a Federal Reserve Rate cut in June faded as markets delayed expectations for policy change into August, pricing just 63-basis points of cuts into the end of the year, suggesting markets are divided in predicting 2 or 3 rate adjustments.Against a backdrop of higher rates, the Japanese yen underperformed, sliding toward 152, before meeting resistance amid intervention fears. The spectre of the Bank of Japan and Ministry of Finance (MoF) intervention continues to hang over USD/JPY, as markets are not yet ready to test officials, extend ranges and force the hand of the MoF.
While up against the JPY, the USD is lower against the EUR, GBP and CAD, though moves have been contained within a narrow range. Last week's global reflation narrative continues to prop up commodity currencies with the NOK, AUD and NZD outperforming.
Expected Ranges
- NZD/USD: 0.5980 - 0.6080 ▲
- NZD/EUR: 0.5500 - 0.5600 ▲
- GBP/NZD: 2.0900 - 2.1100 ▼
- NZD/AUD: 0.9080 - 0.9180 ▼
- NZD/CAD: 0.8120 - -0.178 ▲