Home Daily Commentaries New Zealand dollar trades back above 56 US cents

New Zealand dollar trades back above 56 US cents

Tuesday 18 October, 2022

Daily Currency Update

The New Zealand dollar is stronger this morning when valued against the Greenback trading above 56 US cents. The Kiwi dollar is up over 1.3% from last week’s close and traded just under 0.5650 in the last couple of hours. The NZD/AUD has slipped a little to 0.8950.  NZD/GBP is down to levels not seen since February, at 0.4950. NZD/EUR is slightly stronger at 0.5925 while NZD/JPY is up nearly 1.5% to 83.9. The domestic rates market continued to face upside pressure from global forces, with the 2-year swap rate crossing the 5% mark for the first time since 2008, consistent with market pricing of the OCR at that mark by May next year.

Looking ahead this week on the data front and today Statistics New Zealand will release Consumer Price Index (CPI) figures for the quarter. The market looking for a 1.5% quarterly increase in CPI in Q3, which would lower the annual rate to 6.5% y/y from 7.3% previously.  This would be marginally above the RBNZ’s 1.4% q/q MPS forecast. On Friday we will see the release of the both NZ Trade Balance and monthly Credit Card Spending figures.

Key Movers

Overnight the UK's Chancellor of the Exchequer Jeremy Hunt has reversed most of an economic package announced by the government just weeks ago, including a planned cut to income tax. In a bid to soothe turbulent financial markets scrapping "almost all" the tax cuts announced last month and signalled public spending cuts are on the way. Mr Hunt also scaled back a cap on energy prices designed to help households pay their bills. The moves aimed at restoring the government's credibility for sound fiscal policy after Ms Truss and Mr Kwarteng rushed out a plan for tax cuts without detailing how they would pay for them. Market now pricing for the Bank of England’s November meeting now sits a little under 100bps with a peak rate of 5.15%, well below the 150+bps and peak rate of over 6.25% seen near the end of September. UK gilt yields have plunged overnight in the order of 35-45bps and GBP is the best performing of the majors, up nearly 2% to just under 1.14.

Expected Ranges

  • NZD/USD: 0.5500 - 0.5700 ▲
  • NZD/EUR: 0.5600 - 0.5800 ▲
  • GBP/NZD: 2.0000 - 2.0200 ▲
  • NZD/AUD: 1.1050 - 1.1250 ▼
  • NZD/CAD: 0.7600 - 0.7800 ▲