Home Daily Commentaries New Zealand dollar continues to hold above 62 US cents

New Zealand dollar continues to hold above 62 US cents

Daily Currency Update

The Kiwi dollar is stronger this morning when valued against the Greenback. The Kiwi dollar advanced overnight to a high of 0.6255 after the US Federal Reserve (Fed) decided to raise rates by 25 bps, though it opened the door for a “possible” pause. As Federal Reserve Chair Jerome Powell speaks, the NZD/USD is trading volatile within the 0.6207 at the time of writing. It is mixed on the crosses, with NZD/AUD pushing up to 0.9330, flat against EUR at 0.5640 and with modest falls against GBP and JPY.

Yesterday on the local data front, the official unemployment rate for the March quarter has stuck firm, unchanged at 3.4 per cent. In the March 2023 quarter, the labour force participation rate increased to 72 per cent and the employment rate increased to 69.5 per cent. Both are the highest rates recorded since the household labour force survey began in 1986. Employment and the working-age population increased by 23,000 in the March 2023 quarter. In the year to the March 2023 quarter, all salary and wage rates (including overtime) as measured by the labour cost index, increased 4.3 per cent, compared with 4.1 per cent in the year to the December 2022 quarter. Average total weekly earnings (including overtime) per full-time equivalent employee, as measured by the Quarterly Employment Survey (QES), rose 7.1 per cent in the year to the March 2023 quarter. Average ordinary time hourly earnings in the QES rose 7.6 per cent in the year to the March 2023 quarter.

Key Movers

Overnight in the United States, the Fed Chair Powell and Co. voted to raise rates to the 5.00% - 5.25% area, though tweaked its language regarding additional rate hikes. The Fed shifted to being data-dependent and will asses future decisions based on information about the economy, inflation, and the overall financial markets' behaviour. Federal Reserve officials added that ongoing tightening of credit conditions could aid the US central bank to achieve its 2% inflation goal. Despite removing some hawkish language from the monetary policy statement, policymakers reiterated that inflation is high and that the labour market is tight. Therefore, June’s meeting would likely be live, even though the futures markets had begun to price in the first rate cut in September. Concerning the balance sheet reduction, the Quantitative Tightening (QT) would continue as planned.

The Pound Sterling (GBP) posts new yearly highs against the US Dollar (USD) after the Federal Reserve (Fed) monetary policy meeting on Wednesday, lifting GBP/USD to new yearly highs close to 1.2600. Meanwhile, the Pound Sterling is underpinned by data for March which continued to show UK inflation above 10% for the seventh consecutive month. This suggests the Bank of England (BoE) is far from done with hiking interest rates in the UK, and may have to hike more than once to get inflation back under control. On the data front, yesterday in the UK we saw a 0.5% MoM rise in UK house prices in April when a negative figure had been expected, according to data provided by the UK’s biggest mortgage lender, Nationwide.

Expected Ranges

  • NZD/USD: 0.6100 - 0.6300 ▲
  • NZD/EUR: 0.5500 - 0.5700 ▼
  • GBP/NZD: 2.0150 - 2.0350 ▲
  • NZD/AUD: 1.0600 - 1.0800 ▼
  • NZD/CAD: 0.8350 - 0.8550 ▼