NZD makes new 30 month low as markets price another agressive Fed rate hike
Tuesday 20 September, 2022
Daily Currency UpdateThe New Zealand dollar underperformed through trade on Monday, giving up ground across not only the USD but all major crosses. Having slipped below $US0.60 cents the NZD suffered sustained downward pressure amid broad based USD strength and an uptick in global rates. Market attentions remain affixed to this weeks Fed policy update and rate statement. Investors are largely priced for a 75-basis point hike, while a supersized full percentage adjustment remains on the table after last weeks inflation surprise. Having marked fresh 30-month lows at $US0.5930 the NZD has edged marginally higher buying US$0.5950 at time of writing. With little of note on today’s macro ticket we anticipate the NZD will face continued headwind on any rebound as outsized Fed policy expectations, a souring risk narrative, softer global growth forecasts and a deteriorating domestic economic outlook weigh on the currency. With markets consolidating a break below US$0.60 a deeper correction toward 0.57/0.58 is no longer out of the question.
Key MoversPrice action across major currencies was well contained through trade on Monday as markets sidelined major bets ahead of the Fed, Bank of Japan and Bank of England monetary policy updates later this week. US treasury rates continued to climb with 2-year rates up 8 basis points to a 15-year high while 10-year rates climbed to an 11-year peak. The outpaced appreciation in 2-year rates sees the yield curve further inverted and the gap close in on 50 basis points. Against a backdrop of higher rates, the dollar continued to find support while the JPY underperformed. Having forced the USD back below JP¥143 the Yen gave up 0.3% and the USD marked intraday highs at JP¥143.60 while the euro bounced around parity trading between US$0.9960 and US$1.0030 and the GBP bounced off a break below US$1.14 closing flat on the day.
Our attentions turn now to Japanese CPI data. Ordinarily we wouldn’t place to much credence in the print but with the BoJ meeting Thursday and mounting pressure on policy makers to consider the impacts of the current policy program in the value of the Yen an uptick in inflation pressures could force a policy response. We are watching for an inflation read at or above 3% year on year as key marker price pressures are growing and supportive of a move away from uber accommodative monetary policy.
- NZD/USD: 0.5930 - 0.6030 ▼
- NZD/EUR: 0.5880 - 0.5980 ▼
- GBP/NZD: 1.9020 - 1.9420 ▲
- NZD/AUD: 0.8820 - 0.8920 ▼
- NZD/CAD: 0.7820 - 0.7980 ▼