Home Daily Commentaries New Zealand dollar unable to hold on to gains above 61 US cents

New Zealand dollar unable to hold on to gains above 61 US cents

Daily Currency Update

The New Zealand dollar is stronger this morning when valued against the Greenback. The Kiwi dollar was around 1.5% stronger on Friday, helped by the tailwinds of firmer risk appetite, a stronger CNY, and higher commodity prices. On the week, the Kiwi was up over 3%, ending at a two-month high of around 0.6120. The USD was significantly weaker again on Friday, extending its big falls seen after the US CPI data and tentative signs of changes afoot with China’s zero-Covid policy, conviction is now growing that the USD has peaked for the cycle. The significant repricing of Fed rate expectations has spilled over to the NZ market, with the market now pricing the November RBNZ meeting as a 50-50 bet between a 75bps hike and a 50bps move. The NZD/USD pair is currently trading at 0.6061 at the time of writing.
Looking ahead this week in New Zealand and the economic calendar is fairly quiet. On Monday we will see the release of the BusinessNZ Services Index. A survey of purchasing managers asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories. On Tuesday we will see the release of monthly Visitor Arrivals to New Zealand. Finally, on Friday Statistics New Zealand will release quarterly Producer Price Index (PPI) which is a leading indicator of consumer inflation when manufacturers pay more for goods the higher costs are usually passed on to the consumer.

Key Movers

The downside surprise to US Consumer Price Index on Thursday night continues to reverberate around markets. US equities continued to power higher, the S&P500 up 0.9% on Friday, the USD slumped further, and commodities rallied strongly. Investors’ appetite for risk surged on Thursday following the release of cooler-than-expected US Consumer Prices Index data. Yearly inflation slowed down to 7.7% in October from 8.2% in the previous month, beating expectations of an 8% reading. These figures suggest that inflationary pressures might have peaked and provided some leeway to the US central bank to ease its monetary tightening cycle over the next months. Looking ahead today in the United States and the economic calendar is rather thin today with the only relevant indicator being the Preliminary Michigan Sentiment Index, which has eased beyond expectations, 54.7 from 59.9 in October while the consensus anticipated a softer decline to 59.5.
It was also announced that China is relaxing some of its strict COVID-19 restrictions and cutting quarantine periods has eased concerns about the potential impact on the global economy of a new set of lockdowns which has boosted investor sentiment further. New guidance released by the Chinese authorities on Friday confirmed that international visitors and close contacts would now need to spend 5 days in a quarantine facility and 3 days at home (down from the current 10-day requirement) while airlines would no longer be penalised for bringing Covid-positive passengers to the country, as foreshadowed by media reports last week. An eventual shift away from the Covid-zero policy would remove a major headwind to global growth.

Expected Ranges

  • NZD/USD: 0.5950 - 0.6150 ▲
  • NZD/EUR: 0.5750 - 0.5950 ▲
  • GBP/NZD: 1.9100 - 1.9300 ▲
  • NZD/AUD: 1.0800 - 1.1000 ▼
  • NZD/CAD: 0.7950 - 0.8150 ▲