NZD creeps upward despite contraction in GDP activity
Friday 17 March, 2023
Daily Currency UpdateThe New Zealand dollar edged upward through trade on Thursday buoyed by improved market sentiment following reports the Swiss National Bank will afford Credit Suisse a liquidity backstop of 50 billion Swiss Franc. The news helped soothe market fears lifting risk assets higher while forcing safe haven plays lower. Softer than anticipated domestic GDP data pushed the NZD toward intraday lows at $0.6145 during local trade as investors were forced to reposition rate expectations. Activity contracted 0.6% through the December Quarter leaving the RBNZ in an unenviable position. The domestic economy has stalled in the face of rapidly rising interest rates and stubbornly high inflation. As consumer and business confidence flatlines, the RBNZ is tasked with navigating a path to stimulate growth while still putting downward pressure on inflation. We expect policy makers will issue one final 25 basis point hike in April, bringing the peak OCR to 5%. Despite the clouded domestic outlook the NZD pushed toward intraday highs just south of US$0.62 as market attentions remain squarely affixed to offshore events. With little of note on today’s macro ticket our focus remains with the SVB, Signature Bank and Credit Suisse crisis.
Key MoversPrice action across currency markets was somewhat subdued when you consider the volatility enjoyed across other financial markets. The US dollar closed the day lower while the euro, GBP and commodity currencies all gained, and the yen tracked lower on improved market sentiment. Reports the Swiss National Bank will afford Credit Suisse a 50 billion Swiss Franc backstop helped calm market fears, bolstering demand for risk assets and driving gains across key equity indices. With the dollar giving up ground as haven currencies faltered, the euro pushed off lows near 1.0550 pushing through 1.06 after the ECB elected to lift rates by 50 basis points. While policy makers issued clear signals a 50-point adjustment was coming, some analysts expected recent market uncertainty could prompt policy makers to temper policy changes. With little guidance provided on future moves the market is now pricing in a 30 basis point hike next month. With limited macroeconomic data on hand to drive direction our attentions remain affixed to the ongoing fallout from this latest banking crisis. Sustained improvements in risk sentiment should help ensure price action is well contained while another shock could spark a safe haven run leading into the weekly close.
- NZD/USD: 0.6120 - 0.6280 ▲
- NZD/EUR: 0.5780 - 0.5880 ▲
- GBP/NZD: 1.9280 - 1.9720 ▲
- NZD/AUD: 0.9220 - 0.9330 ▼
- NZD/CAD: 0.8420 - 0.8550 ▼