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Overnight equity markets were mixed, and bond yields dipped slightly. The USD DXY (US Dollar Index) has consolidated at 105.20, these were the same levels that ended Friday’s session. The kiwi along with other currency pairs is most likely to trade within a narrow range over the next couple of days, currently trading at 0.6020. This expectation is tied to the impending release of important US economic data, specifically Consumer Price Index (CPI) and retail sales figures scheduled for release tomorrow night at 12:30am NZT. Today’s local data releases are not expected to have a significantly impact market dynamics.
The RBNZ’s inflation expectations survey from yesterday likely provided some comfort for the central bank. Expectations for annual inflation 1-year ahead dropped by 49bps, from 3.22% to 2.73%. 2-year ahead inflation expectations also decreased, moving from 2.50% to 2.33%. However, 5-year ahead inflation expectations remained steady at 2.25%, while 10-year ahead expectations saw a slight increase of 3bps rising from 2.16% to 2.19%. RBNZ is likely to see positive developments in short-term indicators and they are expected to believe that long-term expectations are still closely in line with their desired target.
NZDJPY is trading at 94.08 and USDJPY is still on the rise, increasing by 0.3% to 156.21, despite the upward movement in Japanese Government Bonds (JGB) yields. Yesterday the yield on the 2-year JGB reached a new high not seen in 15 years, at 0.32%. The yield on the 10-year JGB climbed to 0.93% and the yield on the 30-year JGB reached 2% for the first time since 2011.
NZDGBP is trading just under 0.4800, whereas GBPUSD is slightly higher at 1.2558 which is a recovery from the losses seen last week. Labor data is scheduled for release later today evening. The Monetary Policy Committee (MPC) will be closely watching for indicators of further monetary easing, particularly in wages, which might justify a cut in June. The unemployment rate is anticipated to rise to 4.3% from 4.2% indicating a slight easing in labor market conditions. It will be interesting to see the reaction and interpretation of this data by the Bank of England (BoE) Chief Economist Huw Phill.
Here are the latest mid-market rates:
| Currency Pair | Mid-market rate |
| NZD/USD | 0.6021 |
| NZD/AUD | 0.9108 |
| NZD/JPY | 94.06 |
| NZD/CNY | 4.3584 |
| NZD/EUR | 0.5579 |
| NZD/GBP | 0.4793 |
| NZD/HKD | 4.7029 |
| NZD/SGD | 0.8147 |
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