NZD unable to hold gains as dust settles on last weeks shake up
Daily Currency Update
The New Zealand dollar retreated through trade on Monday as markets took the opportunity to take stock following last week's shake-up across all financial asset classes. Having failed to hold onto moves above US$0.60, the NZD is notably weaker this morning, trading back near US$0.5975 as US yields pared losses and equities traded flat.With little on the macroeconomic agenda to drive direction, it appears investors were content in paring gains and consolidating positions as debate rages as to whether last week's FOMC policy update and softer-than-anticipated non-farm payroll print are enough to signal an end to further tightening in this rate cycle.
Our attention remains affixed to broader market sentiment and the underlying risk narrative. An extension in the current risk-on move could well be the catalyst the NZD needs to consolidate a breakback above US$0.60.
Key Movers
After the turmoil that enveloped financial markets last week, price action through trade on Monday was considerably calmer as investors took the opportunity to take stock and assess last week's moves. US yields recovered losses, while equities traded flat for the day, allowing the USD to find support as debate rages as to whether the Fed has indeed reached the end of its tightening cycle.Commentary from Bank Of Japan (BoJ) Governor Ueda helped underpin the risk on mood as he affirmed the bank's commitment to negative rates, suggesting there was a near-zero chance policymakers would lift rates before year-end. The comments come after last week's adjustment in yield curve controls and alleviate emerging concerns a shift in BoJ policy could drive a risk-off run.
With German factory orders rising in September, the euro is trading near its Friday close, while the GBP found support near similar levels trading at 1.0735 and 1.2375 respectively.
Our attention turns now to the RBA policy announcement and medium-term Fed rate expectations. If markets maintain their conviction in pricing an end to the Fed tightening cycle, the window is open for markets to close the door on USD exceptionalism.
Expected Ranges
- NZD/USD: 0.5900 - 0.6000 ▼
- NZD/EUR: 0.5500 - 0.5600 ▼
- GBP/NZD: 2.0600 - 2.0800 ▲
- NZD/AUD: 0.9120 - 0.9300 ▼
- NZD/CAD: 0.8120 - 0.8220 ▼