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NZD unable to hold onto supports as US consumer spending rallies

Friday 17 September, 2021

Daily Currency Update

NZD - New Zealand Dollar

The New Zealand dollar opens below 0.71 US cents this morning, unable to hold onto gains enjoyed through the domestic session. The NZD surged toward intraday highs just shy of 0.7140 after Q2 GDP data all but affirmed the RBNZ will hike rates by 50 basis points when it next meets in October. Growth through the 2nd quarter surged nearly 3%, well ahead of market and RBNZ expectations, highlighting just how well the economy has absorbed the impacts of the pandemic. Having touched highs at 0.7135, the NZD retreated toward intraday lows below 0.7070 amid a broad USD rebound. Risk aversion amid fears of sustained contagion in China and a surge in US retail sales drove demand for the world’s base currency as investors struggle to adjust global growth and Fed monetary policy expectations. Despite the robust domestic outlook and diverging central bank policies, the NZD remains vulnerable and guided by broader US dollar play. Fed policy expectations will continue to play a bigger role in determining near and medium-term direction than RBNZ policy updates, forcing our attention to shift toward next week's FOMC policy statement and FOMC press conference.

Key Movers

The US dollar outpaced the majority of counterparts through trade on Thursday, buoyed by a surge in domestic retail sales and a sustained aversion to risk. The dollar index jumped half a percent as the EUR, GBP, JPY, CAD, NZD and AUD all fell. Consumers in the US continue to spend despite the challenges imposed by this latest wave of the coronavirus. Total retail sales jumped 0.7 %, a robust print considering a 3.5% decline in auto sales. Excluding auto purchases, retail sales jumped 2%, a positive surprise and suggests perhaps the Fed can downgrade the weight attributed to this latest delta surge when assessing monetary policy. The print prompted a strong market reaction and drove the USD toward a fresh weekly high. Fed policy expectations continue to be a pillar driving direction through the near term and our attentions shift now to next weeks FOMC rate and policy statement for any insight into the timing and scale of QE tapering.

Expected Ranges

  • NZD/USD: 0.7020 - 0.7130 ▼
  • NZD/EUR: 0.5970 - 0.6050 ▼
  • GBP/NZD: 1.9380 - 1.9640 ▲
  • NZD/AUD: 0.9640 - 0.9730 ▼
  • NZD/CAD: 0.8920 - 0.9020 ▼