Global interest rates have continued to edge lower, with the US 10-year rate hitting a four-week low at 4.42% overnight, currently it’s down 4bp to 4.46% for the day, contributing to further flattening of the yield curve, which means the difference between short-term and long-term interest rates is narrowing, as the two-year rate experienced a smaller drop to 4.83%. Equity market began the week on a positive note. Markets focused on the weaker than expected April US labour market data released last week. These numbers indicated a possible slowdown in job growth following the robust performance in the Q1. The data reaffirmed the FOMC stance that current monetary policy is restrictive, implying no immediate need for further interest rate hikes. However, Neel Kashkari, President of Minneapolis Fed mentioned that although it’s probable the Fed will maintain rates at the current levels for an extended period, he didn’t exclude the possibility of a future rate hikes. He also pointed out that sustained inflation in the housing sector could indicate that neutral interest rates might be higher in the near term.
NZDUSD begins the day on a slightly weaker note, slipping below 0.6000 cents mark due to a rise of 0.4% in the USD DXY and a decline in the AUD following the Reserve Bank of Australia’s (RBA) meeting, which was less hawkish than expected. Currently, the kiwi is staying within the narrow trading range of the week with no significant economic data releases scheduled in New Zealand or the US for the week. Overnight, the main Global Dairy Trade (GDT) index rose by 1.8%, specifically whole milk powder (WMP) prices went up by 2.4% and butter saw a 2.1% increase. As the milk production season in New Zealand is coming to an end, most cows will be dried off by the end of May, This seasonal decrease in milk supply from New Zealand usually helps support the prices of dairy products like WMP, as New Zealand is significant supplier in the market.
NZDAUD made some recovery following the RBA’s policy update, edging slightly above 0.9100, while the AUD dipped below 0.6600 against the USD. The RBA maintained its policy rate at 4.35% but the tone of the statement was less hawkish than widely anticipated. Despite the Q1 CPI inflation exceeding expectations, the RBA didn’t see it as a strong signal for policy changes. Governor Bullock emphasized the importance of monitoring inflation closely and stated her belief that the current interest rates are appropriate.
USD/JPY pushed a bit higher to 154.76, it hasn’t been a significant increase than yesterday’s levels. The pair is gradually increasing, unless there’s a clear action or statement from Japanese authorities regarding intervention in the currency market (which they haven’t confirmed officially yet), the rate may keep rising as market participants observe how authorities might react.
GBP is performing poorly compared to other currencies, which has helped NZDGBP making gains, nearing the 0.4800 mark. The amount of economic data releases in limited. Germany’s factory orders for March were below expectations, declining by 0.4%m/m, with February’s figures revised downwards from +0.2% to -0.8%. These numbers indicate continued weakness in the manufacturing industry, although it’s worth noting that the services sector PMI has improvement recently, suggesting that an economic recovery might be underway.
Here are the latest mid-market rates:
| Currency Pair | Mid-market rate |
| NZD/USD | 0.5994 |
| NZD/AUD | 0.9100 |
| NZD/JPY | 92.81 |
| NZD/CNY | 4.3317 |
| NZD/EUR | 0.5577 |
| NZD/GBP | 0.4795 |
| NZD/HKD | 4.6852 |
| NZD/SGD | 0.8116 |
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