Markets quiet as attentions turn to US inflation and presidential debate
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Daily Currency Update
The New Zealand dollar extended Friday’s sell-off through trade on Monday in what was otherwise a relatively quiet start to the week across financial markets. The US dollar was broadly stronger as US treasuries edged higher while China inflation data was again anaemic. China CPI inflation fell to a 3-year low at 0.3%, highlighting overcapacity issues and a distinct lack of consumer demand.The NZD slipped off US$0.6185 to touch session lows at US$0.6125, before consolidating near US$0.6150 leading into this morning’s open. Having underperformed against the USD, NZD downside spilled into other key crosses with the NZD giving up ground to the GBP, EUR, CAD and AUD.
Our attentions turn now to UK labour market data ahead of US CPI numbers Wednesday, while the Trump/Harris presidential debate Tuesday in the US will prove key in shaping election expectations. If Trump proffers a strong performance it could support near term USD gains, while a Harris win will likely ensure focus remains affixed to the Fed and rate cut expectations.
Key Movers
The US dollar outperformed the majority of majors through Monday in what was a relatively quiet start to the week. An absence of headline news flow allowed investors to sideline major bets and direct attentions to US CPI inflation and PPI data due later this week. While the Fed has made it clear its focus has shifted to protecting the labour market, analysts will still want to see inflation tracking lower.A surprise uptick in price pressures may disrupt calls for the Fed to cut rates by 50-basis points next week, while another soft print gives policymakers licence to adopt a faster pace of normalisation. The DXY index is higher as the Pound slipped below 1.31 and the euro gave up 1.1050, while the yen tested 144. The Canadian dollar was the day's only winner, albeit gains were modest.
Our attentions turn now to UK labour market data as the only headline item on the agenda today. While employment growth will be important our focus will be affixed to wage data as a key marker for the Bank of England. Resilience within the labour market gives the BoE license to leave rates on hold this month, with the first likely rate cut to come in November.
Expected Ranges
- NZD/USD: 0.6080 - 0.6200 ▼
- NZD/EUR: 0.5500 - 0.5600 ▼
- GBP/NZD: 2.1100 - 2.1300 ▼
- NZD/AUD: 0.9180 - 0.9250 ▼
- NZD/CAD: 0.8280 - 0.8380 ▼