Mixed fortunes for NZD as hawkish central bank commentaries offset gains
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Daily Currency Update
The New Zealand dollar enjoyed mixed fortunes through trade on Wednesday and ultimately opened softer this morning, having edged lower through the last 24 hours. The NZD spiked following the RBNZ policy meeting and rate statement, touching highs just short of US$0.6150. While officials opted to leave rates on hold at 5.5%, the MPS maintained a hawkish bias noting domestic inflation pressures remain a concern. Policymakers discussed whether a hike was appropriate before opting to leave rates where they are but did adjust their modelled cash rate track to show rates peaking at 5.65% in December. Markets were forced to push back rate cut expectations with the first anticipated reduction in rates now not likely until February 20205. After the initial rally, the NZD retraced gains drifting back below US$0.61, touching US$0.6083 before finding support.Our attentions now turn to Q1 retail sales ahead of a slew of offshore PMI data prints and US jobless claims for direction through Thursday.
Key Movers
There's been plenty of price action through the last 24 hours with the USD DXY index edging higher on the heels of the FOMC meeting minutes and the GBP Spiking following stronger-than-expected inflation data.The dollar found support following the release of the Federal Reserve May Meeting Minutes, which showed several policymakers held a penchant to tighten policy further, while others noted a higher level of uncertainty surrounding the appropriate level of restrictiveness. Yields rallied on the back of the meeting minutes release and pricing for a September rate cut faded as markets adjust expectations and price in higher rates for longer. While the Euro gave up 0.3% and slid below 1.0850, the British Pound performed well, spiking 0.4% after UK inflation failed to fall as far as markets expected. While a reduction in energy prices helped in leading a decline in year-on-year inflation services, inflation remains stubbornly high and printed stronger than expected. With Headline CPI writing in at 2.3%, market pricing for a June rate cut fell to just 12%, down from 50% before the print. Markets are now looking to August as the key meeting for a Bank of England rate amendment.
Our attention turns now to a slew of offshore PMI data prints and US jobless claims for direction through Thursday.
Expected Ranges
- NZD/USD: 0.6050 - 0.6150 ▼
- NZD/EUR: 0.5580 - 0.5680 ▲
- GBP/NZD: 2.0600 - 2.0900 ▼
- NZD/AUD: 0.9130 - 0.9230 ▲
- NZD/CAD: 0.8300 - 0.8400 ▲