NZD scrounges small gains after Fed ops to leave rates on hold
Daily Currency Update
The New Zealand dollar is stronger this morning yet still firmly entrenched within a narrow trading handle as markets absorb the Federal Reserve policy update and upcoming key data events. The Fed opted to leave rates on hold overnight, allowing the NZD to bounce off lows near US$0.5820 toward session and weekly highs just above US$0.5850. With most analysts expecting the Fed would refrain from tightening rates again our attentions were squarely affixed to the accompanying policy statement and rate update. While Powell and the FOMC offered little in the way of new guidance two key changes to the statement helped drive US treasury yields lower and the NZD higher. While the NZD found support on the day it remains firmly entrenched within a narrow trading handle, bouncing between US$0.5770 and US$0.5860. With domestic rate expectations tempered and USD exceptionalism running out of puff markets appear content in waiting for the next catalyst to spur direction. Growing geopolitical and global growth uncertainties will likely curtail any significant upside move with US yields and rate expectations the primary drive of longer-run value. Our attentions turn now to the Bank of England policy update this evening and US non-farm payrolls on Friday, as key markers shaping direction into the weekend.Key Movers
With the Federal Reserve opting to leave rates on hold and offering little new in the way of forward guidance, price action across major currencies has been largely muted. The DXY index is little changed, though the USD has faced some downside pressure as US treasury yields retreated. While scrounging meagre gains against both the euro and GBP the dollar gave up ground against the AUD and JPY on the lower yield backdrop. Verbal intervention from the Japanese Ministry of Finance (MoF) helped the yen to recover losses suffered in the wake of Tuesday’s Bank of Japan (BoJ) policy update. Having maintained an ultra-easy monetary policy program, the BoJ condemned the yen to further weakness forcing officials to comment. Top MoF policymakers came out on Wednesday to state, “...we’re very concerned about one-sided, sudden moves in currencies…we are on standby.” The comments were enough to spook investors and while the BoJ and MoF’s actions continue to work against each other the Yen found support and the USD slipped back below 151 to 150.82.Our attention turns now to US non-farm payroll on Friday and the Bank of England (BoE) policy update tonight. We expect the BoE will leave rates on hold with less than a 5% chance of a hike priced in.
Expected Ranges
- NZD/USD: 0.5770 - 0.5880 ▲
- NZD/EUR: 0.5480 - 0.5580 ▲
- GBP/NZD: 2.0600 - 2.0900 ▲
- NZD/AUD: 0.9080 - 0.9220 ▼
- NZD/CAD: 0.8000 - 0.8200 ▲