NZD slumps to new 2023 low following uptick in US inflation

Daily Currency Update

The New Zealand dollar fell through trade on Thursday, plumbing fresh 2023 lows following stronger than anticipated US inflation data. While traditionally considered a second tier data set, US PPI inflation is typically ignored with markets preferring to focus on the traditional Consumer Price Index, however January saw both headline and core PPI figures jump significantly, continuing the surprise reversal in trend across US macroeconomic data points. The upswing in producer prices further cemented expectations the path toward the Fed’s inflation target of 2% could be a long and drawn out one. US yields and rates pushed higher following the data update and the NZD fell to intraday lows at US$0.6230. There appears little sign the Fed will pause or slow the pace of rates hikes through the next two months with the likelihood of a third hike now being priced into near term yield curves. Under this weight the NZD has given up gains hard won in January and continues to mark a series of lower lows, suggesting the currency is now firmly entrenched within a downturn. Having managed to claw back some ground through the latter part of the overnight session the NZD opens this morning just above US$0.6250.

With a largely empty macro ticket closing out the week our attentions turn to Fed speakers for direction.