NZD falters as US gathers support

Daily Currency Update

The New Zealand dollar underperformed through trade on Tuesday, giving up recent gains amid a broadly stronger USD. With little of note on the domestic ticket the NZD tracked lower through the later stages of the local session, suffering some spillover from the weaker AUD and RBA policy update. Having slipped below 0.63 US cents, the NZD tracked steadily lower overnight, drifting toward 0.6250 amid a broad-based USD recovery. The dollar gathered momentum as commentary from Key Fed officials reminded investors the FOMC intends to continue hiking rates at pace through the months ahead. Markets rushed to adjust treasury expectations driving US 2, 5- and 10-years rates sharply higher. Having fallen 1% from yesterday's open, the NZD found support at 0.6250, and while lower against most key crossed, the NZD did find momentum against the AUD, pushing back above 0.9050 and marking highs at 0.9085. Our attentions turn now to local labour market data. We expect to see the unemployment rate fall to as lows at 2.8% a multi- decade low, while wage growth should remain strong. A robust labour market print will keep the pressure on the RBNZ to deliver another 50-point hike later this month. Offshore commentary from key fed officials and ISM services data will guide overnight direction. Services data will prove key following Monday disappointing performance across Manufacturing. A poor print will elevate fears the US is barreling toward recession and may add downward pressure on the USD.