NZD outperforms as markets pare back last week’s gains
Daily Currency Update
The NZD enjoyed mixed fortunes through trade on Thursday as investors attempted to square positions ahead of key testimony from Fed Chair Jerome Powell. With nothing of substance on the macroeconomic calendar this week, the NZD has been at the mercy of shifts in market sentiment and investors chose yesterday to focus again on last week's softer-than-anticipated non-farm payroll print.US treasury yields fell early before finding support late in the overnight session. The NZD pushed back through US$0.5950, marking intraday highs just short of US$0.5955 before paring gains to close lower on the day, back below US$0.59.
The NZD is however stronger against all key crosses, up against the AUD, GBP, EUR and JPY. Having pushed above AU$0.9250, the kiwi is also approaching 90 against the yen and appears poised to mark fresh highs not seen since 2015.
Our focus turns now to commentary from Jerome Powell as he appears on a panel at an IMF Conference. While we expect he will offer little outside the message delivered after last week's rate statement, price action across yields has been vulnerable and the market is looking for any excuse to extend the post-payroll sell-off and signal an end to USD exceptionalism.
We are watching resistance on moves approaching US$0.60 and supports on breaks toward US$0.5880 as clear markers guiding direction into the weekly close.
Key Movers
The USD rose in conjunction with rising 10 and 30-year treasury yields, with the DXY index up 0.3% on the day as the euro, GBP and JPY all tracked lower. A poor showing at the latest 30-year treasury auction allowed US yields to lurch higher while hawkish comments from Fed Chair Jerome Powell helped pare any expectation for extensive rate cuts through 2024.With the euro and GBP giving up half a per cent, the USD extended its break above 150 against the yen and is now comfortably sitting above 151 at 151.31. Bank of Japan governor Ueda proffered a very cautious approach to unwinding ultra-easy monetary policy when speaking to the Financial Times at a conference through trade on Thursday.
With US yields elevated and Japanese bonds controlled, the USD/JPY should continue to enjoy upside gains as long as Japanese policymakers don’t intervene.
Our attention turns now to commentary from ECB president Christine Lagarde, UK monthly GDP numbers, US consumer sentiment data and more commentary from key Fed officials as we seek direction into the weekly close.
Expected Ranges
- NZD/USD: 0.5880 - 0.6000 ▼
- NZD/EUR: 0.5500 - 0.5600 ▲
- GBP/NZD: 2.0600 - 2.0800 ▼
- NZD/AUD: 0.9200 - 0.9300 ▲
- NZD/CAD: 0.8100 - 0.8200 ▼