Home Daily Commentaries NZD under pressure as risk sentiment continues to sour

NZD under pressure as risk sentiment continues to sour

Thursday 28 September, 2023

Daily Currency Update

The New Zealand dollar fell through trade on Wednesday. as risk sentiment continues to sour in the face of rising bond prices and a stronger US dollar. The VIX index, a measure of volatility, has moved steadily higher this week as investors exit equities and risk assets in pursuit of haven assets. Having slipped below US$0.5950 the NZD edged toward intraday lows at US$0.59 before finding support. Risk sentiment remains downbeat as ongoing concern surrounding China and the global economic outlook combine with rising concern that the US government will be forced to shut down, come midnight on Saturday. While a stopgap measure to secure funding for a further 4-6 weeks is expected to be passed through the House and Senate on Friday, the uncertainty created by bipartisan politicking is amplifying the risk-off mood.

Having given up nearly three-quarters of a per cent through the last 24 hours, the NZD is lower against most crosses as our attentions turn now to German CPI data tonight, along with domestic retail sales and US jobless claims providing second-tier macro markers.  We expect little change in the current risk narrative.

Key Movers

The US dollar continued its rampant run toward new 2023 highs through trade on Wednesday as risk sentiment continues to sour. The DXY index was up another 0.4%, while the Euro tested a break below 1.05 and the GBP slipped below 1.2150, while the USD continues to push higher against the Yen, closing in on 150. Further signs that the US economy is proving more resilient than the Euro area and the UK, is forcing investors toward the USD. With interest rates expected to remain higher for longer, fears of a deeper and longer global recession add further weight to the recent risk-off mood.

With treasury yields and global bond rates continuing to climb and oil prices rising, adding to future inflation expectations, the USD should continue to garner near-term support. In this current risk-off environment, we expect little shift in the underlying narrative with risk assets and commodity-led currency remaining under pressure.

Attention turns today to the German CPI data and US jobless claims.

Expected Ranges

  • NZD/USD: 0.5880 - 0.5980 ▼
  • NZD/EUR: 0.5580 - 0.5680 ▲
  • GBP/NZD: 2.0380 - 2.0580 ▲
  • NZD/AUD: 0.9250 - 0.9350 ▲
  • NZD/CAD: 0.7950 - 0.8050 ▼