NZD/USD Makes Fresh Cycle Lows, Dairy Prices Rise, CPI Up Next

NZD/USD traded lower through Tuesday, making new cycle lows after breaking below 0.6050. We trade just off overnight lows at 0.6040 and trades near 0.6050 down about 0.40% over the past day, following a fall of 0.72% the day prior and is now the worst performing G10 currency this week.

• The NZD now comfortably trades below all key EMAs at 0.6048, with the 200-day EMA currently at 0.6081, while further downside momentum could bring the June 14 lows into play at 0.5996.
• Weak Chinese data from earlier in the week and a lack of any policies updates out of the Third Plenum are still potentially weighing on sentiment, with the AUD also falling in line with the NZD.
• The NZ-US 2yr hovers around the 2024 lows at 5.5bps
• The latest GDT auction saw the Price Index rise by 0.4%, with strong performances from Anhydrous Milk Fat +4.0% to $6764/ton and Cheddar +6.2% to $4217/ton, while Whole Milk Powder fell by 1.6% to $3142/ton. The auction results exceeded expectations, as markets were pricing in a drop of 4-5%. Westpac's have held their 2024/25 milk price forecast at $8.40 although they see risks around weak Chinese economic growth.
• Expiries: 0.5900 (NZD355.5m) for 17th July NY cut. Upcoming notable strikes: 0.6050 (NZD527m July 19), 0.6040 (NZD500m July 18), 0.5650 (NZD350m July 19)
• Focus today will be on New Zealand's 2Q CPI data, with the market expected a drop to 3.4% y/y from 4.0% y/y prior, while the market will also closely be waiting for any updates out of the Third Plenum policy meetings.