NZD tests resistance as fears recede
Friday 31 March, 2023
Daily Currency UpdateThe New Zealand dollar edged back through US$0.6250 Thursday as markets continued to temper fears surrounding the stability of the financial systems. Tensions eased as no fresh bank doubts emerged overnight. Conditions have calmed through the week as the tumult of the last fortnight recedes and investors look to stabilise positions. Improved risk sentiment helped lift the NZD back above US$0.6250 and toward intraday highs at US$0.6265. While the USD closes broadly weaker on the day thanks to an uptick in European rates the NZD continues to struggle in extending gains beyond US$0.6260/0.6270. While fears of a banking crisis have abated there remains an underlying residual concern. With investors still wary a drag on risk assets remains in play, capping NZD upside through the short term.
Our focus turns now to a stacked macroeconomic ticket with NZ consumer confidence, Chinese PMI data, Euro area CPI data and USD PCE deflator (a key inflation metric) numbers all due. With attentions returning to traditional macro drivers we expect some price fluctuation into the weekly close.
Key MoversThe Euro and GBP were the days big movers, buoyed by higher yields following the latest Spanish and German CPI prints. While price pressures fell significantly in March, down 1.5% on the February blockbuster read, the downturn was still not a large as markets anticipated while core inflation metrics remained stubbornly stable. With attentions turning to Euro area CPI data tonight, markets moved to price tighter ECB monetary policy, lifting European rates. The euro pushed above 1.09 marking intraday highs north of 1.0920, while the GBP pushed toward 1.24-and two-month highs.
As fears surrounding the state of the financial system recede, our focus returns to key macroeconomic drivers and a stacked ticket leading into the weekly close. With Chinese PMI data, Euro area CPI data and USD PCE deflator (a key inflation metric) numbers all due we expect some volatility into the weekly close.
- NZD/USD: 0.6150 - 0.6320 ▲
- NZD/EUR: 0.5680 - 0.5820 ▼
- GBP/NZD: 1.9620 - 1.9920 ▼
- NZD/AUD: 0.9250 - 0.9350 ▲
- NZD/CAD: 0.8420 - 0.8520 ▲