Home Daily Commentaries NZD climbs despite rising geo-political tension and risk off mood

NZD climbs despite rising geo-political tension and risk off mood

Daily Currency Update

The New Zealand dollar outperformed through trade on Monday despite a broadly risk off mood. Treasury yields rallied, key equity indices closed lower and commodity markets fell amid reports US house Speaker Nancy Pelosi is preparing a visit to Taiwan this week. China has warned against the visit suggesting “it won’t sit idly by”. Fears rising geo-political tensions will ignite conflict in the region dampened demand for the Yuan and oil prices yet had little spill over or impact on the NZD, at least for now. Having tracked sideways through the domestic session the NZD climbed overnight punching through resistance at 0.6280 to mark intraday highs at 0.6350. US ISM manufacturing data spurred a run on the USD and sparked NZD upside as the latest print showed activity had fallen to its lowest level in two years. New orders contracted, and inventories expanded suggesting imminent economic recession is a reality. While the NZD remains incredibly vulnerable to fluctuations in the broader risk narrative last night’s move highlights just how much stock markets are placing in US data sets and rising recession fears in shaping direction.

With little of note on today’s domestic ticket our attentions turn to the RBA’s latest policy update and Fed Speak as key officials front the media.

Key Movers

The US dollar underperformed through trade on Monday, relinquishing ground to most counterparts following a weaker than anticipated ISM Manufacturing Index print. The read showed activity has fallen to its lowest level in 2 years, while key indicators within the report suggest economic recession is imminent. New Orders have contracted for a 2nd consecutive month while inventories continue to expand. The gap between new orders and inventories is keenly monitored and provides a good marker for recession. The dollar index fell as the EUR, JPY and GBP enjoyed modest gains. The JPY forced the USD back below 132 as market unwind recent USD appreciation amid a correction in global rates. Only the CAD failed to enjoy an upturn, closing lower on the heels of a 5% fall in oil prices.

With the market keenly attuned to any signal the USD is headed for recession out attentions turn to commentary from Fed Member Evans and new Job openings in shaping direction through the day ahead.

Expected Ranges

  • NZD/USD: 0.6230 - 0.6380 ▲
  • NZD/EUR: 0.6130 - 0.6230 ▲
  • GBP/NZD: 1.9120 - 1.9420 ▼
  • NZD/AUD: 0.8950 - 0.980 ▲
  • NZD/CAD: 0.8020 - 0.8180 ▲