Kiwi outperforms as IMF upgrades growth forecast

Daily Currency Update

The New Zealand dollar outperformed most counterparts through trade on Tuesday despite a nervous start through the domestic session. Commentary from the People’s Bank of China set Australasian stocks and global equities lower and forced the NZD toward intraday lows below 0.7170 before an upwelling in sentiment drove the currency toward fresh highs. The NZD led gains across pro-cyclical and commodity led currencies after the IMF upgraded its forecasts for global growth from 5.2% to 5.5%. While the world remains ensconced by the pandemic, vaccines and fiscal stimulus are expected to promote a return to normality through the second half of the year, fuelling optimism and allowing markets and the IMF to discount short-term headwinds.
With little of note on today’s domestic docket, our attentions turn to the Federal Reserve and Australian CPI data for direction. The Fed is expected to affirm its commitment to accommodative monetary policy while Australian CPI is expected to remain well below the RBA’s target band. Having reversed the year’s early downtrend through recent days, a poor inflation print could help the NZD extend its recovery against its antipodean cousin and extend beyond resistance at 0.9360.