Home Daily Commentaries NZD recovers on heels of weaker USD

NZD recovers on heels of weaker USD

Daily Currency Update

The New Zealand dollar surged back above 0.65 US cents on Thursday, recovering Wednesday’s downturn amid a renewed demand for risk, stronger commodity prices and a broadly weaker US dollar. Having opened at 0.6460 the NZD tracked sideways for much of the domestic session before trending upward overnight. An uptick across key commodities on the heels of Shanghai’s re-opening helped push the kiwi back toward 0.65 US cents, while broad-based US dollar weakness following softer than anticipated labour market data allowed markets to consolidate gains and extend the rally toward intraday highs at 0.6560. US ADP employment data printed well short of market expectations and help fuel market demand for risk as investors scramble to correct expectations for Fed rate hikes. Having broken above 0.6550 the NZD now sits near highs last seen in early May and we are keenly watching for a break above 0.6570/80 as a possible signal the recovery will extend toward and through 0.66 US cents.

Our attentions turn now to US Non-farm payroll data. A print below consensus could fuel another risk on run and help push the AUD toward 0.73 into the weekly close.

Key Movers

The US dollar underperformed through trade on Thursday as softer than anticipated ADP employment data and stronger commodity prices helped bolster demand for risk and sent the currency into a tailspin against most major counterparts. The Euro and GBP both advanced over half a percent testing 1.0750 and 1.2590 respectively while commodity-led currency enjoyed an even larger upturn. A softer than anticipated ADP employment report saw markets reverse gains enjoyed in the wake of Wednesday's ISM manufacturing print as investors now see good news as a negative drag on risk and bad news as a positive. Why? Sustained strength across US macroeconomic data sets will embolden the Fed to maintain its aggressive approach to monetary policy normalisation, tightening conditions beyond a neutral setting at 2% and sapping cheap and available funding from the market. A correction in US data points and a softening in activity could give the Fed reason to pause hikes above neutral, meaning conditions remain favourable to investors. With that in mind our attentions turn to US non-farm payroll and ISM services data. Leading indicators suggest a softening in labour market performance. With the consensus for a 325K uptick in employment opportunities and an unemployment rate low of 3.5% a miss could see the USD sustain Thursday’s downturn into the weekend.

Expected Ranges

  • NZD/USD: 0.6460 - 0.6620 ▲
  • NZD/EUR: 0.6030 - 0.6130 ▲
  • GBP/NZD: 1.8980 - 1.9320 ▼
  • NZD/AUD: 0.9020 - 0.9080 ▼
  • NZD/CAD: 0.8180 - 0.8280 ▲