New Zealand Dollar Caught Between Hawkish Messaging and Domestic Fragility

Economic

Summary:

There are some positives building for the NZD in H2 according to new research.

Investment bank analysts say the New Zealand Dollar is navigating a complex landscape shaped by shifting Reserve Bank of New Zealand (RBNZ) policy signals, fragile domestic demand, and a sharp rebound in global investor sentiment.

Updating clients on potential H2 performance, analysts say the ongoing global equity markets rally and central banks recalibrating policy paths mean the NZD may find itself at a pivotal turning point in the weeks ahead.

Morgan Stanley says a tonal shift in the RBNZ's May statement could be key, noting the central bank’s rising concern that evolving trade tariffs could fuel inflationary pressures.

The RBNZ also described fiscal policy as "broadly neutral," signalling confidence that Finance Minister Nicola Willis’ restraint will not materially weigh on rate expectations.

With the RBA clearly on a more dovish trajectory than the RBNZ, Morgan Stanley argues the relative outlook now favours NZD over AUD.

"A break below 1.06 in AUD/NZD opens potential to 1.02 if the New Zealand economy proves resilient," the bank said, positioning NZD for outperformance if inflation risks deter further cuts.

MUFG notes that the NZD, alongside fellow high-beta commodity currencies like AUD and NOK, has benefited from a resurgence in global risk appetite.

The MSCI ACWI index recently hit record highs following the delay of reciprocal U.S. tariffs and a U.S. court ruling that deemed several tariffs illegal — developments that have lifted sentiment and temporarily eased fears of a deepening trade war.

New Zealand Dollar Caught Between Hawkish Messaging and Domestic Fragility_1

Above: NZD/USD (top) and NZD/GBP.

While NZD's sensitivity to global equities is well-established, questions remain about the durability of this rally, especially if trade tensions re-escalate or domestic weaknesses in New Zealand start to bite harder.

Despite the relatively hawkish stance expressed by the RBNZ in May, Barclays remains cautious on the NZD’s broader outlook.

The bank characterises the May RBNZ cut as "hawkish" due to its alignment with neutral rate estimates, but warns that domestic economic risks remain tilted to the downside.

With restrictive policy still working its way through the system, Barclays sees a meaningful risk that the RBNZ may yet be forced to cut the Official Cash Rate (OCR) into accommodative territory, a move that is not yet fully priced by markets.

This introduces downside risk to the NZD, especially if incoming data disappoints.

Source: Poundsterlinglive

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Michelle

Economic

Forex

The U.S. dollar was steady on Tuesday as talks between Beijing and Washington continued for a second day, stirring investors' expectations of an easing in trade tensions, while sterling dropped as British jobs data pointed to a weaker labour market.

Officials from the world's two largest economies were meeting in London to try to defuse a dispute that has widened from tariffs to restrictions over rare earths.

"Unlike the Geneva talks (held in May), where tariff relief provided easy wins, the London talks are now tackling thornier issues like chip export controls, rare earths, and student visas," said Charu Chanana, chief investment strategist at Saxo.

U.S. President Donald Trump and his Chinese counterpart Xi Jinping spoke by phone last week at a crucial time for both economies that are showing signs of strain from Trump's cascade of tariff orders since January.

The dollar index, which measures the U.S. currency against six others, was less than 0.1% higher at 98.989, and remained close to a six-week low of 98.351 it touched last week.

The index is down 8.7% this year as investors, worried about the impact of tariffs and trade tensions on the U.S. economy and growth, flee U.S. assets and look for alternatives.

The euro was flat at $1.1423, while the Australian dollar, often seen as a proxy for risk sentiment, was 0.1% lower at $0.6513.

Sterling was weaker after UK jobs data implied further weakness in the labour market, which could influence how quickly the Bank of England cuts interest rates.

British wages rose by a slower-than-forecast 5.2% in the three months to April, pushing sterlingdown 0.4% against the dollar to $1.3499.

The labour market data "was definitely on the weak side", Danske Bank FX analyst Kirstine Kundby-Nielsen said.

"This puts a question mark on the hawkish bias that we've seen from the Bank of England."

The BoE is due to meet next week and is expected to keep the interest rate unchanged. Money market traders are pricing in about 48 basis points of cuts by year-end, up from about 39 bps before the data.

Thomson ReutersUK wage growth slows in 3 months to April

The Bank of Japan is also expected to maintain borrowing costs at current levels at next week's policy meeting. Its governor, Kazuo Ueda, suggested on Tuesday that the timing of the next interest rate hike could be pushed back.

"Once we have more conviction that underlying inflation will approach 2% or hover around that level, we will continue to raise interest rates to adjust the degree of monetary support," Ueda told parliament.

Risks to Japan's export-heavy economy from Trump's tariffs have pushed back market bets on the timing of the next rate hike, and investors are on the look-out for clues from Ueda on how soon rate increases could resume.

The yenwas last little changed at 144.50 per dollar, having gained more than 8.5% against the U.S. currency this year, supported by safe-haven flows during the market tumult unleashed by Trump's tariff chaos.

Investor focus this week will be on the U.S. consumer price index report for May due on Wednesday. The report could give insight into the impact of tariffs, with investors wary of any flare-ups in inflation ahead of the Fed's policy meeting next week.

The U.S. central bank is also expected to hold rates steady, with traders pricing in nearly two 25 basis-point cuts by the end of the year.

Source: TradingView

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Adam

Economic

Trade talks resume with cautious optimism

Asian equities traded mostly higher overnight, with risk sentiment supported by renewed optimism surrounding US-China trade talks. Negotiations between the world's two largest economies are set to resume in London today.

Comments from US officials have helped buoy investor expectations ahead of the crucial discussions. Treasury Secretary Scott Bessent described the initial round of discussions as a "good meeting" whilst Commerce Secretary Howard Lutnick called them "fruitful".

While no concrete outcomes have been announced from the previous sessions, markets appear encouraged by the constructive tone and the willingness to continue dialogue. This diplomatic progress represents a significant shift from the heightened tensions that characterised US-China relations in recent months.

The positive sentiment reflects traders' hopes that meaningful progress could emerge from these high-level discussions. Any breakthrough in trade relations could have far-reaching implications for global economic growth and market stability across multiple asset classes.

European markets poised for modest gains

In Europe, equity futures point to a slightly firmer open following Monday's muted performance. The Euro Stoxx 50 future is up 0.2%, suggesting a modest rebound after the cash index closed down 0.2% yesterday.

The pan-European STOXX 600 is holding steady around the 553 level, with investors remaining cautious but hopeful ahead of the next phase of US-China negotiations. This level represents a key technical support area that traders are watching closely.

Gains in the autos sector have provided some support to European indices, reflecting the sector's sensitivity to global trade developments. However, weakness in financials and industrials has capped upside momentum so far this morning.

The mixed sectoral performance highlights the ongoing uncertainty among investors about the broader economic outlook. While trade optimism provides a positive catalyst, concerns about economic growth and corporate earnings continue to weigh on sentiment in certain sectors.

Currency markets show dollar strength

In currency markets, the US dollar is trading firmer against most peers, with EUR/USD steady around the 1.14 mark. This strength reflects continued confidence in the US economy and expectations for monetary policy divergence.

The Japanese yen remains on the back foot, placing it among the weakest performers in the G10 group. The yen's weakness continues to reflect Japan's ultra-accommodative monetary policy stance compared to other major central banks.

Meanwhile, European government bonds are attempting a mild rebound after yesterday's declines, but the recovery in German Bunds remains relatively limited for now. This tepid bond performance suggests investors are adopting a wait-and-see approach to European fixed income markets.

Commodities benefit from improved risk appetite

Commodities are being buoyed by the improved risk tone across global markets. Crude oil prices are marginally higher, with sentiment lifted by hopes that trade progress might support broader global demand.

There has been little in the way of new supply developments overnight, keeping the focus squarely on macro drivers rather than fundamental supply-demand dynamics. This suggests oil prices are primarily responding to broader risk sentiment rather than specific industry factors.

Gold is also reflecting the mixed sentiment, with the precious metal facing headwinds from dollar strength but finding some support from ongoing geopolitical uncertainties.

Individual stock movements worth watching

On the corporate front, UK housebuilder Bellway saw its shares climb 4% after upgrading its full-year volume guidance, supported by steady reservation rates and a growing forward order book.

This positive performance in the housing sector reflects improving confidence in the UK property market. Bellway's upgraded guidance suggests the company is seeing sustained demand despite broader economic uncertainties.

Shares in fund manager Aberdeen advanced 5% after JPMorgan upgraded the stock to "overweight" from "neutral". This analyst upgrade reflects improving sentiment towards the asset management sector and Aberdeen's specific strategic positioning.

Elsewhere, Novo Nordisk gained nearly 2% following reports that activist investor Parvus Asset Management is building a stake in the company. Activist involvement often signals potential corporate changes that could unlock shareholder value.

UK employment picture worsens

This morning’s UK employment data presents worrying news for the Bank of England (BoE) and the government. The unemployment rate rose to a four-year high of 4.6%, while the number of staff fell by 55,000 in April, and projections indicate losses of 100,000 in May. Wage growth slowed too, which at least allows the BoE some more leeway in considering cuts to interest rates to help stimulate the economy.

Much depends now on next week’s UK inflation data, to be released on 18 June, which might provide a further boost to the argument in favour of cutting rates (known as ‘dovish policy’).

source : ig

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Blue River

Technical Analysis

USD/JPY ranges within daily cloud (144.43/145.59) also between daily Tenkan and Kijun-sen lines, with Kijun-sen (145.38) capping the action today.

Near term technical structure is slightly bullishly aligned, with growing positive momentum and repeated close above Tenkan-sen supporting the notion.

On the other hand, overbought stochastic might be limiting factor that partially offsets positive signals.

Sideways near-term mode to be expected as long as price holds within the cloud, as strong downside rejection on Monday and upside rejection today supports scenario.

Firmer direction signals to be expected on clear break of either boundary of daily cloud, with dollar being underpinned by optimism on US China trade talks, though support was so far insufficient for stronger movements.

Markets await release of US inflation data this week, to get more clues about Fed’s action in the near future.

Signals that Bank of Japan will keep its monetary policy unchanged in the meeting next week, could be initial negative signal for yen.

Sustained break below cloud base / daily Tenkan to weaken near term structure and risk test of supports at 143.65/00 and 142.40 on stronger acceleration.

Conversely, firm break of cloud top to generate bullish signal and expose targets at 146.15/38 (Fibo 61.8% of 148.64/142.11 / May 29 spike high).

Res: 145.29; 145.59; 146.15; 146.38.
Sup: 144.33; 143.65; 143.00; 142.40.

Source: ACTIONFOREX

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Adam

Economic

What matters in U.S. and global markets today

I'm excited to announce that I'm now part of Reuters Open Interest (ROI), an essential new source for data-driven, expert commentary on market and economic trends. You can find ROI on the Reuters website, opens new tab, and you can follow us on LinkedIn, and X.

Markets have effectively flatlined awaiting the outcome of this week's U.S.-China trade talks in London, though as we near the halfway point of 2025, investors are taking an increasingly benign view of the disruptive and often chaotic last six months, as I discuss in today's column.

But now onto all of today's market news.

Today's Market Minute

* Global stocks and the dollar edged higher on Tuesday as trade talks between the United States and China were set to extend to a second day, giving investors some reason to believe tensions between the world's two largest economies may be easing.

* The Trump administration on Monday ordered U.S. Marines into Los Angeles and intensified raids on suspected undocumented immigrants, fueling more outrage from street protesters and Democratic leaders who raised concerns over a national crisis.

* All three major U.S. asset classes – stocks, bonds and the currency – have had a turbulent 2025 thus far, but only one has failed to weather the storm: the dollar. Hedging may be a major reason why, claims ROI columnist Jamie McGeever.

* Asian countries aren't rushing to buy U.S. energy commodities, even though doing so would help them meet President Donald Trump's demand for lower trade surpluses. Read the latest from ROI columnist Clyde Russell.

* European defence stocks have been on a tear since the devastating conflict in Ukraine started in 2022, a trend that has only accelerated since announcements of European rearmament plans. But the beneficial economic impact of the European defence supercycle may be heavily dependent on how it’s financed, argues Panmure Liberum investment strategist Joachim Klement.

White smoke or London fog?

U.S. and Chinese officials resumed trade talks for a second day in London on Tuesday, hoping to secure a breakthrough over export controls on rare earths and other issues threatening to widen the rupture between the world's two biggest economies.

The two delegations, led on the U.S. side by Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer opposite a Chinese contingent helmed by Vice Premier He Lifeng, are meeting at the ornate Lancaster House in the British capital.

The talks ran for almost seven hours on Monday and are set to resume on Tuesday, with both sides expected to issue updates. Lutnick said the talks would continue all day.

U.S. President Donald Trump said the talks were difficult but going well: "We're doing well with China. China's not easy."

White House economic adviser Kevin Hassett on Monday said the U.S. was likely to agree to lift export controls on some semiconductors in return for China speeding up the delivery of rare earths.

Wall Street stocks (.SPX), were little changed on Monday, with a marginal outperformance for the tech sector .

Treasuries were in better form, with yields on long-term maturities ebbing in a week of heavy new debt sales. Those start with a $58 billion auction of 3-year notes later on Tuesday, followed by sales of 10- and 30-year tenors on Wednesday and Thursday.

The U.S. May consumer price report tomorrow will barrel into the middle of everything.

On that score, the New York Federal Reserve's monthly household survey for May showed Americans' anxiety about the future path of inflation easing last month.

That tallies with a broader investor take on the tariff crunch. Many seem to feel that the worst fears are being scaled back as bilateral deals get thrashed out and business sentiment appears to calm.

However, the resilience likely hinges on further détente in the trade war. And that's why this week's London talks are so important, especially given that Trump's 90-day pause on wider 'reciprocal' tariffs ends early next month.

On the currency front, sterling weakened as Bank of England easing bets rose following the release of the latest UK labor data. Pay growth in Britain slowed sharply, and unemployment rose to its highest in nearly four years in the three months to April.

Elsewhere, European (.STOXXE), and Chinese stocks (.CSI300), were more downbeat and lower on the day. Japan's Nikkei (.N225), bucked that trend and pushed higher due to reduced fears about the domestic bond market.

European indexes were weighed down partly by a reversal of recent gains for Swiss banking giant UBS (UBSG.S), . The stock retreated as much as 7% as Swiss markets reopened after a long weekend and investors reacted to government proposals that would require the bank to hold an additional $26 billion in capital.

Vaccine makers such as AstraZeneca (AZN.L) , and Sanofi (SASY.PA), pushed higher, brushing off news that U.S. Health Secretary Robert Kennedy fired all 17 members of a Centers for Disease Control and Prevention panel of vaccine experts.

Source: reuters

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Warren Takunda

Economic

The unemployment rate in the UK rose to 4.6% in the period from February to April 2025, the Office for National Statistics (ONS) said on Tuesday.

That represents a 0.1 percentage point increase compared to the previous period, and it marks the highest rate seen since summer 2021.

The number of staff on payroll, meanwhile, fell by 109,000 month-on-month in May, the largest drop seen since May 2020.

Annual pay growth excluding bonuses eased to 5.2% in the period from February to April, the slowest pace seen in seven months.

The number of available jobs fell by 63,000 to 736,000 between March and May, the 35th consecutive quarterly decline.

The data suggests the UK’s labour market is cooling as firms are hesitant to hire, a trend attributed to rising employer costs.

In April of this year, businesses saw their payroll taxes (National Insurance) rise to 15% on salaries above £5,000, instead of 13.8% on salaries above £9,100.

The government also increased the minimum wage and the living wage, the latter received by workers over 21, in April.

“Indeed, with increased national insurance contributions on businesses now bedded in, the employment picture is deteriorating as companies look to scale back hiring, and in some cases cut their UK workforce significantly,” said Richard Carter, head of fixed interest research at Quilter Cheviot.

"This is all underpinning what is a difficult task for the Bank of England,” he added.

“With wage growth slowing but inflation rising, it will not want to pull the trigger on rate cuts too soon and put extra sails into the inflation charge. This perhaps explains Andrew Bailey’s recent tone that rate cuts will be slow and cautious, as despite what is an obviously slowing economy, many risks remain present in the world.”

UK inflation for April was reported at 3.5%, although the ONS later pointed to a data error, noting that the figure should have been 3.4%

The Bank of England will meet next week for their monetary policy meeting.

“There’s no doubt that US trade policies have contributed to business uncertainty and there will be companies who have put off investment whilst they figure out exactly what new trade deals might mean for them,” added Danni Hewson, AJ Bell head of financial analysis.

She added: “Whilst the smart money is still on no cut at the Bank of England’s meeting next week, the softening in the labour market and cooling wage increases have added to expectations that the MPC will deliver another cut later in the summer.”

Source: Euronews

To stay updated on all economic events of today, please check out our Economic calendar

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Glendon

Cryptocurrency

Ethereum (ETH), at this price of $2,750, continues to be a tough challenge, as it has previously prevented the cryptocurrency from increasing. There have been many moments when Bitcoin tried to break away from this level, but it didn’t. There has been a careful review of whether ETH can keep its current level, as it would support any movement towards growth.

The chart by @ali_charts explains that traders should wait for a decisive breakout before deciding on their next moves. Without breaking $2,750, any short-term profits could be fast to vanish. Should the price movement stall, it might mean that traders fell for a bull trap and had to face quick losses. Ethereum’s upcoming movements will depend on its price point.

Key Downside Support Zones Identified

If Ethereum is turned away from the $2,750 resistance, its price may drop to support levels at $2,500 and $2,380. These levels come from consolidations and substantial recoveries that occurred in these industries before. Ethereum appears to always come back to these points when growth becomes weaker, which could help it minimize a significant drop.

The chances of a correction rise as investors’ confidence lowers or significant economic changes occur. Traders should watch the movements around these supports, since going beyond them can result in more price declines. They provide a set of guidelines for figuring out potential short-term support during times of doubt.

Indicators Show Mixed Momentum Signals

According to the Binance chart, from early 2025 until June 10, Ethereum went from a low of $1,500 to trading close to $2,679. The current RSI number is 61.69, so the price movement is overbought, and this could slow down the market or result in a brief price fall.

Source: Tradingview

At this moment, the MACD is in negative territory at -12.19, demonstrating that investors are still cautious. Still, recent price hikes suggest that an upswing is possibly near. Even with this price increase, signs are warning investors, meaning they should wait for stronger reasons to trade in a certain direction. Since the price of Ethereum is still confined to a range, traders are watching the $2750 level that could decide where the market heads next.

Source: CryptoSlate

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