NZD steady as strong rebound in domestic growth offsets USD strength
Daily Currency Update
The New Zealand dollar pivoted between support and resistance Thursday enjoying mixed fortunes as markets responded to stronger-than-expected domestic growth and rising global rates. After two weak quarters where the economy pitched into a technical recession, quarter 2 GDP data showed a better-than-anticipated rebound in domestic activity. GDP rose by 0.9% q/q and 1.8% against this same time last year suggesting the economy has found a much stronger footing than most expected. The NZD lurched above US$0.5950 in response to the positive print before tracking lower through the latter half of the domestic session and early overnight trade. With the USD advancing against a backdrop of higher global rates the NZD drifted toward intraday lows at US$0.5895 before finding support. As the USD pared early gains the NZD moved back above US$0.59 and opened this morning buying US$0.5935. Having closed the day largely flat against the dollar the NZD maintained gains against key crosses, touching 6-week highs against the GBP and pushing toward AU$0.9250.Our attention now turns to domestic consumer confidence and trade data ahead of Japanese inflation data a Bank of Japan policy meeting and European and US PMI data updates.
Key Movers
A stronger-than-anticipated US jobless claims report allowed the US dollar to extend its post-Federal Open Market Committee upturn through trade on Thursday, pushing the DXY index to its highest level in 6 months. Unemployment claims fell last week, hitting their lowest level since January in a downward trend that defies expectations of a looser US labour market. With most investors preparing for an end to interest rate hikes, a string of stronger labour market and macroeconomic data has forced a correction in 2024 rate expectations with the Fed now expected to maintain a higher setting for longer.With the USD testing new highs the GBP was among the weakest major currencies after the Bank of England elected to leave rates on hold overnight. In what was a close call MPC policy makers voted to leave rates at 5.25%, ending a run of consecutive rate adjustments dating back to the end of 2021. While a tightening bias was maintained markets have pared expectations for future rate hikes with just 70% anticipating another adjustment before year-end. The GBP slipped below US$1.23 and US$1.2250 following the policy decision and while it found some support as the USD pared early gains it still opens this morning below US$1.23.
Our attention now turns to domestic consumer confidence and trade data ahead of Japanese inflation data a Bank of Japan policy meeting and European and US PMI data updates.
Expected Ranges
- NZD/USD: 0.5880 - 0.6000 ▼
- NZD/EUR: 0.5520 - 0.5600 ▼
- GBP/NZD: 2.0500 - 2.0900 ▼
- NZD/AUD: 0.9180 - 0.9280 ▲
- NZD/CAD: 0.7920 - 0.8020 ▲