Market Update 13/06/2024

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The overnight session mainly focused on US CPI and the Fed, both of which significantly impacted markets. Stocks and bonds rallied strongly as US CPI for May came in lower than expected, with the headline inflation rate at 0.0% m/m, 3.3% y/y, and core inflation at 0.2% m/m and 3.4% y/y. These figures were about 0.1% lower than anticipated. As a result, US interest rates fell, and the USD weakened significantly ahead of the FOMC meeting. The Fed kept the interest rates unchanged at 5.5%, with dot plot indicating 1-2 cuts this year, slightly less than market expectations but close. The key message was that inflation remains too high, while progress toward the target is encouraging, the committee needs more confidence that it’s sustainable before easing policy. During the press conference, Chair Powell reiterated “emphasizing that any action depends on data and no specific path is set”. Overall, it was a very neutral statement, suggesting that rate cuts are not imminent as they wait for more reliable data. The USD regained some strength following the post-CPI decline.
 
NZD was one of the top-performing G10 currencies, gaining over 1% against the USD. NZDUSD traded to 0.6220, reaching the same highs as in Jan & Feb. USD movements will continue to be the main driver, but with the Fed/CPI events behind us, things might start to stabilize. For NZDUSD, we might remain stable unless there are surprising local data. The support level for the pair is at 0.6140-50, and if there’s weak NZ data, 0.6100 could become the next target. The post CPI highs last night were around the previous resistance area 0.6215-20, which remains a challenging level to break.
 
NZDAUD is holding close to 0.9300 now but may see movement as more local data becomes available. The first significant data to watch is Australian employment figures today. There’s resistance around 0.9300-20 with initial support sitting at 0.9250-60, and potentially at 0.9220 afterward.
 
NZD gained against most major European currencies. The UK GDP for April was 0.0% m/m compared to +0.4% in March. Although this was slightly better than expected, monthly data can be volatile. On a 3-month basis, growth increased slightly from 0.6% to 0.7%.
 
There’s no significant data from New Zealand today. Australian employment data for May will be released at 1:30 pm NZT. The market expects a 30k increase in employment and a slight improvement in the unemployment rate to 4.0%

 Here are the latest mid-market rates:
 

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