NZD creeps back toward US$.60 as pressure mounts on USD exceptionalism
Daily Currency Update
The New Zealand dollar advanced through trade on Friday, buoyed by a largely weaker US dollar. Having marked fresh 2023 lows through October the NZD has enjoyed some reprieve through the first half of November as tighter global financial conditions allow markets to more accurately price an end to the Fed and FOMC tightening cycle. With expectations for a string of Fed rate cuts in H2 2024 growing the door has opened for the NZD to push back toward US$0.60. Having tested a break above this threshold through the middle of last week the NZD largely held onto gains holding above US$0.5950 and closing near US$0.5990. With little of note on today’s macro ticket direction will continue to derive from market sentiment and Fed policy expectations. Our attention turns to Tuesday FOMC meeting minutes as a conduit offering key insights into future Fed policy expectations.Key Movers
The US dollar was among the weaker currencies through trade on Friday, giving up ground to all 10 major counterparts amid an improved risk tone. The dollar index gave up 0.5% as markets priced out a more aggressive path of Fed rate cuts through 2024. With inflation tracking toward target and US macroeconomic data sets suggesting the robust tightening cycle employed by the FOMC is working to control future price pressures analysts have begun pricing an easing in policy conditions through next year. Financial conditions have tightened naturally easing the burden on the Fed to continue hiking rates. While we do anticipate policy makers may issue one final rate hike through Q1 next year the promise of a correction in policy through H2 is beginning to weigh on the Dollar. The DXY index has given up nearly 3% from its October high. With the USD on the back foot, the Euro pushed back above 1.09, while the GBP held onto gains above 1.24 despite a sharp correction in UK retail sales Friday. Consumer spending retreated in October suggesting the Bank of England’s 14 rate hikes are now adding increased pressure on UK households. A string of souring macroeconomic data sets has market pricing an end to the BoE tightening cycle with policy makers expected to begin cutting rates through the second half of next year. Without its yield advantage, the GBP may struggle to maintain upward momentum against key major counterparts. In other news, Japanese Yen has forced the USD back below 150 and was among the best performers Friday.With little of note on today’s docket, our attentions turn to Tuesday’s FOMC meeting minutes and Canadian inflation data Tuesday for direction through the week.
Expected Ranges
- NZD/USD: 0.5850 - 0.6030 ▲
- NZD/EUR: 0.5420 - 0.5560 ▼
- GBP/NZD: 2.0500 - 2.0900 ▼
- NZD/AUD: 0.9120 - 0.9280 ▼
- NZD/CAD: 0.8100 - 0.8300 ▼