NZD back below US$0.61 as markets rally around USD after events in Pennsylvania
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Daily Currency Update
There is plenty to absorb through the start of the week, with price action through trade on Monday reflecting elevated confidence former US President Donald Trump will win re-election in November. The US yield curve steepened, allowing the USD to edge higher across the board, forcing the NZD to give up 0.3% and slip off highs above US$0.6110 to trade toward US$0.6070.The events in Pennsylvania at the weekend helped offset increased expectations for a Fed rate cut in September. Fed Chair Jerome Powell said the Fed is more convinced inflation is heading back to target, confirming the FOMC will cut rates before price pressures reach 2%. Having failed to rebound back through US$0.6130, the NZD remains vulnerable.
Until the market is confident in pricing the Fed’s next move, the NZD will likely continue to test supports at US$0.6050. US labour market and inflation data remain key in shaping direction. Domestic inflation metrics due Wednesday and RBNZ policy expectations will prove key in driving near-term NZD performance, particularly against other key major counterparts.
The NZD has slipped to a 10-month low against the GBP, giving up US$0.47, while JPY intervention has forced a retracement from highs above 99.00 to 95.92 on open this morning.
Key Movers
The USD is stronger this morning advancing against nearly all majors with commodity-led currencies the day's big losers. The CAD, SEK and NOK gave up the most against the USD as the DXY dollar index edged near 0.2% higher on the day.The tragic events in Pennsylvania at the weekend offset heightened expectations for an imminent rate cut as markets firmed bets former US President Donald Trump will win re-election in November. US equities railed, while treasury yields steepened and the dollar found support amid the promise of more deregulation under a republican regime.
Our attention turns now to US retail sales, a key marker in gauging domestic activity. A soft read will give markets confidence the Fed will want to lower rates to retain growth and activity, while a resilient consumer base gives the Fed licence to maintain restrictive policy for longer.
With UK inflation Data Wednesday and the ECB policy meeting Thursday, there is plenty on the docket to drive direction into the weekly close.
Expected Ranges
- NZD/USD: 0.6050 - 0.6130 ▼
- NZD/EUR: 0.5550 - 0.5650 ▼
- GBP/NZD: 2.1200 - 2.1500 ▲
- NZD/AUD: 0.8950 - 0.9050 ▲
- NZD/CAD: 0.8270 - 0.8370 ▼