The New Zealand dollar hit a two-month high as weaker-than-expected US consumer spending in January and the next round of tariffs from Trump 2.0 revived questions about the pace of the Federal Reserve’s plans to cut interest rates.
The greenback was broadly weaker after US Commerce Departments figures on Friday showed retail sales dropped 0.9% in January in its steepest decline since March 2023, adding to the negative tone for the world’s reserve currency after US President Donald Trump outlined his plans for a reciprocal tariff regime. Walmart’s December earnings later this week will be watched for a fresh update on US consumer sentiment.
The kiwi climbed to 57.34 US cents at 7am in Auckland from 56.91 cents on Friday and increased to 90.24 Australian cents from 90 cents last week.
“A significant downside surprise to US retail sales data contributed to rally in treasuries and weighed on the US dollar,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note. “The NZ dollar was the strongest G10 currency, extending above 57 US cents Friday night, to reach the highest level since mid-December.”
The local currency’s strength comes ahead of Wednesday’s first monetary policy statement of the year from the Reserve Bank, which is expected to deliver a half-percentage point cut to the current 4.25% official cash rate.
Meanwhile, the Reserve Bank of Australia is expected to cut its target cash rate a quarter-point to 4.1% on Tuesday in what’s seen as a line call given inflationary pressures from persistently high wages.
Sidelined
French President Emmanuel Macron is hosting an emergency summit for European leaders on Monday to discuss the Ukraine war after US officials suggested the continent won’t have a role in talks to end the conflict. The NZ dollar advanced to 54.61 euro cents from 54.40 cents last week.
Equity markets were mixed on Friday, with the Nasdaq edging up 0.4% and the Dow Jones Industrial Average declining 0.4%, while across the pond London’s FTSE 100 slipped 0.4%, Germany’s DAX 30 fell 0.4% and France’s CAC 40 increased 0.2%.
US earnings are on track to have climbed 15% in the December period from a year earlier with three-quarters of the S&P 500 index companies having reported, although expectations for the coming year have moderated.
Australian futures are pointing to a 0.6% decline for the S&P/ASX 200 index today.
US markets are closed on Monday for the Presidents Day public holiday, while domestic focus turns to the flurry of corporate earnings as reporting season kicks up a step.
Among local companies reporting on Monday are milk marketer The a2 Milk Co, courier and information management firm Freightways and electricity generator-retailer Contact Energy, while BlueScope Steel and Leandlease are due across the Tasman.
Meanwhile, the latest BNZ-BusinessNZ performance of services index is scheduled for release, as is Statistics New Zealand’s December travel and migration report.
