NZD outperforms as China rebounds from Covid restrictions
Thursday 2 March, 2023
Daily Currency UpdateThe New Zealand dollar advanced through trade on Wednesday, buoyed by a surge in risk demand following stronger than anticipated Chinese PMI data. China PMI indicators showed a surge in economic activity led by the largest increase in manufacturing in more than a decade. While coming off a low base, the removal of COVID restrictions has allowed the Chinese economy to launch headlong into full-scale operation, lifting growth expectations and boosting hopes the world's second largest economy will drive down supply chain constraints and global inflationary pressures, and prop up growth. The NZD consolidated a break above US$0.6260 and strode toward US$0.6260 overnight as the US dollar softened amid the improved risk backdrop and softer than expected ISM data. Having advanced against the USD the NZD also enjoyed a near 1% advance against the AUD as softer Australian GDP data and CPI indicators softened RBA rate expectations. With little of note on the domestic macroeconomic ticket, the NZD will be driven by offshore risk markers led by European CPI data and US jobless claims.
Key MoversThe US dollar fell through trade on Wednesday amid improved risk appetite and renewed European inflation woes. The dollar index moved 0.5% lower on the day as ISM manufacturing data indicated activity continues to contract, while employment activity slipped back into contractionary territory. The softer data contrasts a string of stronger data sets and cast a mild pall over renewed rate expectations. The Euro surged, up 0.8% and through 1.0650. Expectations for the Euro area CPI will prove sticky and offer an upside surprise jump following a 1% increase in German inflation through February. The stronger print sees annual inflation up 9.3% elevating expectations for tonight’s broader Euro Area CPI print. Elevated inflation expectations have driven European rates higher this week and helped underpin the single currency. The GBP offered little and after testing a break above 1.21 slipped back toward 1.20 under the weight of a widening in rate differentials and a weaker domestic economic outlook. Our attentions turn now to US jobless claims and European CPI data for guidance and direction through Thursday.
- NZD/USD: 0.6180 - 0.6280 ▲
- NZD/EUR: 0.5820 - 0.5920 ▲
- GBP/NZD: 1.9000 - 1.9500 ▼
- NZD/AUD: 0.9180 - 0.9280 ▲
- NZD/CAD: 0.8420 - 0.8550 ▲