NZD finds support in improved risk sentiment
Daily Currency Update
The New Zealand dollar advanced through trade on Monday, buoyed by a rebound in risk sentiment. Markets have adopted an optimistic view when assessing developments in the Middle East. Despite Israel initiating its ground invasion and pushing into Gaza at the weekend, its approach appears more tactical and not the forceful, destructive, retaliation markets first feared. The tempered push into Gaza helped elevate risk appetite with positive risk sentiment driving direction and consolidating a recovery above US$0.58.Having marked intraday highs of US$0.5835 against the USD, the NZD is marginally stronger when valued against the GBP and euro, while giving up ground to the AUD as markets pare NZD/AUD gains enjoyed through September and early October. Our attention turns now local Business Confidence surveys while Chinese PMI data and a Bank of Japan (BoJ) policy update headline a crowded macroeconomic docket.
Key Movers
US treasuries advanced through trade on Monday but failed to drag the USD higher as markets instead placed greater stock in improved risk sentiment. Markets appear jittery ahead of what promises to be a blockbuster week filled with a critical Fed policy announcement, BoJ meeting and US labour market data. Against a backdrop of higher rates, the USD underperformed with the DXY index sliding 0.4%, amid a stronger GBP and euro.With the Fed meeting on Wednesday and the US non-farm payroll looming on Friday, our attention first turns to the BoJ policy meeting. Markets anticipate policymakers will finally announce an end to the yield curve control program amid rising inflation and a weaker yen. Having refrained from intervening on moves above 150 last week, a muted BoJ response today will most certainly send the yen tumbling and require costly and timely intervention.
Either way, we can expect volatility leading into and out of this month's BoJ policy meeting.
Expected Ranges
- NZD/USD: 0.5770 - 0.5900 ▲
- NZD/EUR: 0.5450 - 0.5550 ▲
- GBP/NZD: 2.0700 - 2.0900 ▼
- NZD/AUD: 0.9100 - 0.9200 ▼
- NZD/CAD: 0.8020 - 0.8120 ▲