NZD edges back toward US$0.62 as all eyes turn to ECB
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Daily Currency Update
The New Zealand dollar crept higher through trade on Wednesday, edging back toward US$0.62 amid a broad-based USD sell-off. The NZD found support through the Australasian session, buoyed by stronger than anticipated China services data. Having bounced off intraday lows at US$0.6172 the NZD pushed toward $US.6190 before a better-than-expected US ISM services report drove USD gains and pushed the NZD back toward the intraday low. The headline rise in the ISM index was well above consensus estimates and drove knee-jerk USD gains before markets adopted an abrupt about-face, reversing gains and driving the USD lower on the day. The NZD extended toward intraday highs at US$0.6195, and our attentions now shift to tonight’s European Central Bank policy meeting and tomorrow’s all-important US non-farm payroll print.Key Movers
There have been some big moves across G10 currency markets through the last 24 hours with the Bank of Canada joining the Swedish Riksbank and Swiss National Bank in cutting rates and entering an easing cycle. As widely expected, the Bank of Canada cut its policy rate by 25 basis points to 4.75%. Bank of Canada Governor, Tiff Macklem said, “we have come a long way in the fight against inflation and our confidence that inflation will continue to move closer to our 2% target over the months ahead” adding “it is reasonable to expect further cuts to our policy interest rate”. Markets were quick to adjust expectations pricing two additional rate cuts through the end of the year (likely September and December). The CAD fell against the USD and is lower than most major counterparts except the yen. The Japanese yen was the day's big loser, down nearly 1%. A downside miss in the Bank of Japan’s (BoJ) preferred measure of wages for April forced markets to adjust expectations for BoJ policy. Our attentions are now squarely affixed on commentary from BoJ board member, Toyoaki Nakamura. Nakamura is speaking in Sapporo and we are keenly attuned to any signal that may suggest the BOJ is setting up for a reduction in Bond purchases next week.JPY slippage and CAD downside saw the USD DXY index climb on the day but stay flat against the euro, GBP, AUD and lower against the NZD.
Our attention now turns to the European Central Bank policy meeting tonight.
Expected Ranges
- NZD/USD: 0.6100 - 0.6220 ▲
- NZD/EUR: 0.5600 - 0.5750 ▲
- GBP/NZD: 2.0550 - 2.0800 ▼
- NZD/AUD: 0.9280 - 0.9350 ▲
- NZD/CAD: 0.8420 - 0.8520 ▲