New Zealand dollar recovers losses suffered in wake of Friday’s non-farm payroll surprise
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Daily Currency Update
The New Zealand dollar opens this morning having clawed back losses suffered in the wake of last week's stronger-than-anticipated US non-farm payroll print. An upside surprise in job creation and strong wages growth pushed global yields upward, driving the USD higher against all majors through trade on Friday, marking the DXY index’s single biggest daily appreciation since April.The NZD slipped off highs approaching US$0.61 and was lower against the majority of major counterparts Friday as market participants cut expectations for Fed rate cuts. Markets pared bets for two 25-point rate cuts through H2, pricing just 36-basis points of cuts following the stronger print, as the resilient labour market risks keeping inflationary pressures elevated.
Having slid toward US$0.61, the NZD recovered some of the post-payroll sell-off through Monday as markets pare positions ahead of Wednesday’s all-important US inflation print and FOMC policy update. Having found support, the NZD traded as high as US$0.6125 overnight. US price pressures are key to governing implied Fed rate expectations, while the Fed dot plot will offer a much-needed peek into the timing and trajectory of US rate adjustments.
With a snap election called in France, there is plenty to digest and drive markets through the week ahead and we expect significant volatility.
Key Movers
The euro has been the big mover through trade on Monday, notably weaker following European Parliamentary elections and President Macron’s shock decision to call a snap election. A significant shift to the right across France, Germany and other European states has elevated fears surrounding European Political Risk, centred around France after Macron’s party's poor showing in the European election forced the President to call a snap election in a bid to regain some control within the National Assembly.French and German bond spreads weakened forcing the euro lower. The single currency gave up 0.6%, sliding toward 1.0750. Having found support in recent weeks, euro volatility may elevate leading into the French election on June 30. The euro aside the USD is stronger against the yen, helped by an uptick in global rates, pushing back above 157, a previously critical marker for intervention.
Our attention remains on European political instability while US CPI data and an FOMC policy meeting headline a jam-packed docket this week. We expect plenty of volatility.
Expected Ranges
- NZD/USD: 0.6080 - 0.6200 ▲
- NZD/EUR: 0.5650 - 0.5730 ▲
- GBP/NZD: 2.0650 - 2.0850 ▼
- NZD/AUD: 0.9230 - 0.9330 ▼
- NZD/CAD: 0.8380 - 0.8480 ▲