Home Daily Commentaries New Zealand dollar trades above US$0.63

New Zealand dollar trades above US$0.63

Monday 9 January, 2023

Daily Currency Update

The New Zealand dollar is stronger this morning when valued against the US dollar, trading at US$0.6320 at the time of writing. The NZD/USD is looking at the US$0.6300 zone and toward the next resistance that stands at US$0.6310 (Jan 5 high). Above attention would turn to US$0.6355/60, a critical area that capped the upside several times. A consolidation above US$0.6360 should open the doors to more gains. On the flip side, US$0.6250 is the immediate support, followed by US$0.6215. Meanwhile, rising cases of COVID-19 in China will continue to impact the New Zealand Dollar. Economic activities in China are continuously scaling down as firms have still not resumed operations on a full-fledged note. It is worth noting that New Zealand is one of the leading trading partners of China, and a decline in the volume of economic activities in the Sino region impacts the New Zealand Dollar. Looking to the week ahead, the aforementioned US CPI report is the major event. Locally we receive ANZ-Roy Morgan consumer confidence (TUES.) and building permits (WED.), both unlikely to influence NZD price action. It’s a busy week for both Chinese and Australian data releases, the former delivering CPI, PPI and trade balance data whilst the new monthly CPI report, retail sales and trade balance is reported across the Tasman. Other data points that may capture the market’s attention include Tokyo inflation numbers (given recent Bank of Japan developments) and the preliminary reading of the University of Michigan consumer confidence survey.

Key Movers

Friday’s US session delivered the first US jobs report for the year, causing the US dollar to weaken and a sharp pullback for US bond yields. Adding 223,000 jobs for December (versus 200K expected) and the unemployment rate falling to a new cycle low at 3.5% was another solid US jobs report – the labour market continues to defy the Fed’s aggressive tightening. The major talking point from the data was the average hourly earnings reading, December’s MoM rate printing at 0.3% versus an expected 0.4%. This accompanied major downward revisions to headline jobs growth and wages, delivering a goldilocks report. Slowing wages growth feeds into the hope that the Fed will further slow the rate hikes, perhaps hoping for a 25 basis points hike (to a target rate of 4.50% - 4.75%) at its 01 February meeting. Current market pricing assigns a 75/25 split between a 25 basis points/50 basis points hike. US equities logged their best day since November on hopes that the Fed can engineer a fabled soft landing – the Nasdaq climbing close to 3%, whilst the S&P 500 added 2.28%. The pound extended its gains against the US dollar, surging more than 160 pips on Friday, following a disappointing ISM Services report and an earlier jobs report. The GBP/USD is trading at US$1.2077. UK’s next week’s calendar will feature Retail Sales, Gross Domestic Product, and the Trade Balance. On the US front, its calendar will feature the Consumer Price Index (CPI), unemployment claims, and the University of Michigan (UoM) Consumer Sentiment.

Expected Ranges

  • NZD/USD: 0.6200 - 0.6400 ▲
  • NZD/EUR: 0.5850 - 0.6050 ▲
  • GBP/NZD: 1.8850 - 1.9050 ▼
  • NZD/AUD: 1.0700 - 1.0900 ▼
  • NZD/CAD: 0.8350 - 0.8550 ▲