Home Daily Commentaries New Zealand dollar trades below 62 US cents

New Zealand dollar trades below 62 US cents

Monday 29 August, 2022

Daily Currency Update

The New Zealand dollar is weaker this morning when valued against the greenback. The NZD was 1.4% lower on Friday, ending the week at a six-week low around 0.6340 on the back of the Fed Chair Powell delivered his much-anticipated keynote address at Jackson Hole on Friday night. Powell’s speech served as a reminder that a global recession is a real possibility, sending the Kiwi dollar lower, historically the local currency tended to perform poorly during major global economic downturns. On the data front, there was a modest rebound in the ANZ Consumer Confidence Index in August although, at 85.4, it remains at deeply depressed levels and consistent with, at face value, recessionary conditions. There is a long list of headwinds facing consumers including high inflation, rising mortgage rates, and falling house prices, although the welcome fall in petrol prices over the month provided some immediate relief to confidence levels, albeit relatively small. Looking ahead this week and it is fairly quiet in New Zealand. On Wednesday we will see the release of the ANZ Business Confidence Index. A Survey of about 1,500-2,000 businesses asks respondents to rate the relative 12-month economic outlook as a leading indicator of economic health - businesses react quickly to market conditions, and changes in their sentiment can be an early signal of future economic activity such as spending, hiring, and investment. On Wednesday we will also see the release of the monthly building consents. On Friday we will see the release of the quarterly Overseas Trade Index which measures the change in the price of internationally traded goods over the last quarter.

Key Movers

In the United States on Friday US Federal Reserve Chair Jerome Powell Jackson Hole's speech was brief but on point. The speech was almost entirely devoted to the Federal Reserve’s commitment to getting inflation back to the 2% target. The message landed with a thud on Wall Street, sending the Dow Jones Industrial Average down more than 1000 points for the day. The Dow Jones average finished down 3 per cent on Friday, its worst day in three months. The tech-heavy Nasdaq composite shed nearly 4 per cent. Some on Wall Street expect the economy to fall into recession later this year or early next year, after which they expect the Fed to reverse itself and reduce rates. The key message was that the Federal Reserve intends to keep the cash rate at restrictive levels “for some time ” because history shows that loosening monetary policy too soon can allow high inflation to become entrenched. Powell didn’t give much away about the rate decision in September, saying it will depend on inflation and jobs data received by that meeting. On Friday, an inflation gauge that is closely monitored by the Fed showed that prices actually declined 0.1 per cent from June to July. Though prices did jump 6.3 per cent in July from 12 months earlier, that was down from a 6.8 per cent year-over-year jump in June, which had been the highest since 1982. The drop largely reflected lower gas prices.

Expected Ranges

  • NZD/USD: 0.6050 - 0.6250 ▼
  • NZD/EUR: 0.6050 - 0.6250 ▲
  • GBP/NZD: 1.9000 - 1.9200 ▲
  • NZD/AUD: 1.1100 - 1.1300 ▼
  • NZD/CAD: 0.7900 - 0.8100 ▲