NZD underperforms as Fed soundbites dominate direction

Daily Currency Update

Amid an elevated risk-off environment the NZD underperformed through trade on Thursday, marking fresh 2023 lows before finding support. After a relatively quiet start to the day, the NZD trended lower through the latter half of the domestic session before marking overnight lows at US$0.5816 as investors prepared for Jerome Powell’s all-important market update. Conditions were whippy leading into the speech and volatility continued through the address as Powell offered both hawkish and dovish soundbites. Powell pointed to the resilience of economic growth and the labour market as markers supporting further rate hikes, while at the same time acknowledging the significant tightening in financial conditions, suggesting persistent tightening “can have implications for monetary policy”. US treasury yields surged to a 16-year high before paring gains, while the USD followed a similar track, rallying early before correcting lower and allowing the NZD to recover the days early losses. The NZD now sits near US$0.5850 as our attentions turn to domestic trade figures, Japan inflation data, UK and Canadian retails sales, a slew of Fed speakers, and of course Israel/Hamas tensions as the primary drivers guiding direction into the weekly close.