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Equity markets performed strongly following the Bank of Canada’s 25bps rate cut and in anticipation of a similar cut from the ECB tonight. The yield on the US 10-year dropped by 4bps to 4.28%. The ADP report showed US private payrolls grew by 152k in May, which was below the expected 175k. The US services ISM index rebounded significantly, rising to 53.8 from 49.4 in Aril, driven by stronger business activity and new orders growth, exceeding expectations. However, survey respondents expressed ongoing concerns about high interest rates and inflation.
NZDUSD continues to strengthen, partly due to increased exports improving the Terms of Trade, which rose by 5.1% after a 7.8% decline in the previous quarter. Additionally, the strong Caixin China PMI 54.0 vs the previous 52.5 provides a short-term support. Lower US ADP private employment figures overnight also contributed, with the market starting to price in a second rate cut by year end. From a technical standpoint, long-term downtrend established in March 2021 presents crucial resistance at 0.6210. If we close above this level, a move to the 0.6300 resistance levels might be expected. The first significant support level is at 0.6140. Non-farm payrolls data at the end of the week and the Fed’s meeting next week are also key events to watch.
NZDAUD kept rising, mainly due to the weakening AUD as it was triggered by a weaker than expected Q1 GDP report from Australia (0.1% vs 0.2 expected), the pair traded above 0.9300, reaching its highest level since mid-March.
NZDEUR reached 0.5700 for the first time since late February ahead of tonight’s ECB meeting. The ECB is expected to be the second major central bank this week to cut interest rates, reducing them from 4.50% to 4.25%. The NZD seems poised to test significant resistance in the 0.5710/40 range.
Today’s highlights include ANZ NZ Commodity Prices at 1:00pm and Australian Trade Balance at 1:30pm NZT. Tonight, we’ll see ECB Rate Statement, along with the US Trade Balance and Initial Jobless Claims reports.
Here are the latest mid-market rates:
| Currency Pair | Mid-market rate |
| NZD/USD | 0.6193 |
| NZD/AUD | 0.9312 |
| NZD/JPY | 96.66 |
| NZD/CNY | 4.4953 |
| NZD/EUR | 0.5697 |
| NZD/GBP | 0.4842 |
| NZD/HKD | 4.8381 |
| NZD/SGD | 0.8349 |
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