NZD surges higher into weekly close amid uptick positive risk sentiment

Key Movers

The USD dollar gave up ground against the majority of major counterparts through trade on Friday as US data releases weighted on the currency and a positive risk backdrop helped divert flows back toward risk assets. A softer than anticipated US consumer spending report and a lower inflation print for May helped drive demand for equities and risk assets as analyst expectations for a 2nd consecutive monthly pause in the tightening cycle lifted. Consumer Spending slowed to just 0.1% in May, well down from the 0.6% growth seen through April while the Fed’s preferred measure of inflation the PCE deflation index continued its downward trajectory, up only 0.32% month on month versus 0.4% in April. After enjoying upward momentum leading into Friday’s data update US treasury yields retreated, reversing course and closing flatter on the day. With the USD under pressure, the Euro closed the week back above 1.09, despite a softer than expected Euro Are CPI update. Headline inflation fell below 6% year on year, yet core price pressures remained stubbornly sticky, ensuring bets for further ECB tightening remain in play.
The Yen pushed back against the USD forcing the dollar of highs above 145 and back below 144.50. Finance Minister Suzuki was out again trying to jawbone a higher JPY ahead of further intervention, suggesting the softening Yen was entirely one sided. While ministers and BoJ officials pontificate as to yen values it is unlikely the embattled currency will make any real headway until the Bank of Japan moves off its ultra easy monetary policy platform.
Our attentions turn now to US ISM manufacturing data ahead of the 4th of July Holiday Tuesday.