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Market Update 15/05/2024

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NZD gained 0.4% overnight to 0.6040 on the back of a weaker USD, thought the gains may be limited ahead of the key US Consumer Price Index (CPI) & Retail Sales data release tonight at 12:30am NZT. Overnight the core Producer Price Index (PPI) data from the US beat estimates by 0.5% m/m compared to the forecast of 0.2%. Fed chair Powell commented that the April PPI data was not particularly strong and had mixed elements, which aligns with their view. He did not provide any new significant insights and confirmed that the Fed is likely to maintain current interest rates for now, without any immediate cuts.

Tonight’s US CPI report is forecasted to show that headline prices increased by 3.4% y/y and 0.4% m/m. If the actual figure is below 0.3% or above 0.4%, it could lead to significant market movements in either direction. A US CPI comes in below or in line with expectations tonight, risk assets might gain, which could boost the NZD. However, if the CPI number comes out stronger than expected, the NZD might decline.

USDJPY remained above 156.00 and NZDJPY remains at very strong level around 94.50, despite remarks from Japan’s Finance minister Suzuki and an increase in Japanese Government Bond yields (JGB). FX rates are primarily influenced by short-term rates and central bank policies. If the BOJ is not in a hurry to narrow the rate gap between the USD & JPY, yen bears will remain undeterred. A lower-than-expected inflation report tonight might lead the BOJ to act more quickly. If the USDJPY rate begins to fall, Japanese authorities might intervene. Conversely, a higher-than-expected CPI report could strengthen the USD.

Aussie wage date is scheduled for release today at 1:30pm NZT, if the data is not as good as expected, it could make it unlikely for the Reserve Bank of Australia (RBA) to increase interest rates further. As a result, it might push the NZDAUD exchange rate towards the resistance level of 0.9130. If it breaks this level, then the next target will be 0.9200 based on the technical analysis.

Here are the latest mid-market rates:

Currency Pair Mid-market rate
NZD/USD 0.6040
NZD/AUD 0.9115
NZD/JPY 94.49
NZD/CNY 4.3726
NZD/EUR 0.5583
NZD/GBP 0.4797
NZD/HKD 4.7176
NZD/SGD 0.8164

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