Dire domestic activity print forces NZD to mark new lows
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Daily Currency Update
The New Zealand dollar faced new pressures yesterday, sliding below US$0.5650 after weaker than expected local GDP data. The NZD Q3 GDP release was terrible. The economy contracted at a much faster pace than anticipated, while analysts revised down Q2 performance, culminating in an annualised pace of contraction of over 4% through the last 6 months. That said, November activity was higher than expected and an ANZ business survey suggests an uptick in optimism leading into 2025 on the heels of lower interest rate expectations. Having sunk to touch intraday lows at US$0.5610, the NZD found support in a stronger CNY fixing. The Peoples Bank of China continue to keep a strong hold on the yuan to avoid a rapid and steep depreciation and prevent a move through US7.30, lifting the NZD back toward US$0.5660, before settling near US$0.5630 leading into this mornings open.Having traded near US$0.6030 leading into the US presidential election, the NZD has suffered a sharp and dramatic correction through the last two months of 2024. Unfortunately, the outlook remains bearish moving into 2025 as the uncertainties and vagaries of a Trump administration cast a pall across global trade expectations and China’s growth outlook, while a weak domestic outlook supports a faster pace of interest rate adjustments. We are keenly attuned to any commentary over the holidays that hints to tariffs and trade policy and expect volatility will continue leading into and after the January 6 inauguration.
This is our last market update for 2024. A huge thank you to all readers for your support this year. Have a happy and safe holiday. We will be back in mid-January
Key Movers
The USD DXY Index rose again through trade on Thursday, extending its post FOMC/Fed upturn. Gains were largely attributed to broader JPY weakness after Bank of Japan Governor Ueda dented market expectations a rate hike may be coming in January. Ueda noted “it will take some time to see the full picture of recent wage negotiations and the impacts of Trump Administration”. While data continues to support a rate adjustment, officials seem wary of moving too quickly. The yen fell sharply following the meeting, with the USD nearly 2% higher, pushing up through 157.50 and marking a fresh 5-month high. The Great British pound is also lower after the Bank of England policy meeting saw three members move against the majority and call for a rate cut. Markets lifted expectations for 2025 price cuts, but with Governor Bailey announcing “a gradual approach to future interest rate adjustments remains right,” movement across yields was contained. The GBP moved half a percent lower and is now trading back near 1.25, down from 1.2630 leading into the policy meeting.Our attentions turn now to the US PCE deflator report as a key marker of inflation, while NZ trade and consumer confidence data, Japan CPI and UK retail sales number round out the ticket.
Expected Ranges
- NZD/USD: 0.5580 - 0.5680 ▼
- NZD/EUR: 0.5380 - 0.5500 ▼
- GBP/NZD: 2.2000 - 2.2400 ▼
- NZD/AUD: 0.8980 - 0.9120 ▼
- NZD/CAD: 0.8050 - 0.8190 ▼