Markets ignore domestic rates dip and NZD moves back above US$0.60 on improved risk sentiment
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Daily Currency Update
The New Zealand dollar recovery continued through trade on Thursday despite calls for easier monetary policy and a lower domestic rates backdrop. NZ inflation expectations data showed price pressures are expected to dip across all sectors, a welcome reprieve for the RBNZ, affording policy makers confidence tighter policy has done the job in curtailing inflation. Markets immediately lifted expectations for an imminent rate cut and forced the 2-year rate to fall by 30 basis points to 2.03%, while longer run 5- and 10-year yields also closed in on 2%. The New Zealand dollar edged lower following the print, but recovered as an improved risk backdrop continues to support a break back above US$0.60. We open this morning just short of US$0.6015.Our attentions remain with the broader risk narrative, while Fed commentary, China inflation data and Canadian employment data are key markers guiding direction into the weekly close.
Key Movers
When compared with the fireworks of the last week, price action among majors on Thursday was somewhat muted. The US dollar DXY index enjoyed a short lived boost on the heels of better than expected jobless claims data. After last week's lacklustre non-farm payrolls print, attentions were keenly attuned to weekly unemployment claims. Jobless claims fell more than expected, allaying fears of a more rapid economic slowdown and deterioration of the labour market. US yields rallied and calls for the Fed to cut rates by as much as 50 basis points in September were pared back. The euro pushed toward 1.0950 before sliding back to 1.0920, closing flat on the day, while GBP tracked between 1.2740 and 1.2770. With risk aversion fading following Monday’s flash crash, the yen and Swiss franc underperformed, while commodity currencies edged higher.Our attentions turn now to Fed commentary, China inflation data and Canadian employment data as key markers guiding direction into the weekly close.
Expected Ranges
- NZD/USD: 0.5980 - 0.6050 ▲
- NZD/EUR: 0.5450 - 0.5550 ▲
- GBP/NZD: 2.1050 - 2.1350 ▲
- NZD/AUD: 0.9080 - 0.9200 ▼
- NZD/CAD: 0.8220 - 0.8320 ▲