NZD underperforms as risk appetite sours
Wednesday 31 August, 2022
Daily Currency UpdateNew Zealand underperformed through trade on Tuesday slipping below 0.6150 amid improved US macroeconomic indicators, an uptick in treasury yields, and a downturn across key commodities. Having tracked sideways through the domestic session the NZD found support in the early part of offshore trade, extending off 0.6150 to mark intraday highs at 0.6190 before marking a steady depreciation into this morning’s open. Risk appetite wavered following reports Taiwan had fired a warning shot at a Chinese Drone, while stronger than anticipated US macro sets coupled with more hawkish Fed rhetoric helped drive key equity indices lower and the US dollar higher. Having marked intraday lows at 0.6130 our attentions turn now to a crowed macro data set. Chinese PMI, Euro area inflation data, Canadian GDO, and US employment data headline the ticket while the Peoples Bank of China’s daily Yuan fix will also shape direction. The PBOC has set a higher Yuan rate through the last five trading days in a bid to moderate recent depreciating forces. With the USD/CNY approaching the critical 7 mark we are looking for signals Yuan weakness could spill over into the NZD. The NZD is considered an important proxy to the Yuan and sustained depreciation and USD advance above 7 could be a signal the NZD is headed for a break below the psychological 0.60 handle.
Key MoversThe Euro outperformed major counterparts through trade on Tuesday as a further depreciation in gas prices and hawkish ECB helped support the embattled shared currency and foster a break back above parity. European Gas Futures fell 7% marking a near 30% depreciation this week and forcing the benchmark Dutch futures rate back to 253 Euro per megawatt hour. While Gazprom will shut down supply to Germany through its Nordstream pipeline market nerves have eased as gas storage sites show reasonable reserves and regulatory interventions to control the flow on into consumer energy prices are expected. The Euro moved above parity marking intraday highs at 1.0050. In contract, the Great British pound continued to track lower as the rising risk of recession and an unprecedented surge in inflation pressures weigh on the currency. Having tumbled below 1.17 the GBP touched intraday lows at 1.1625 before consolidating nearer 1.1650 leading into this morning’s open. With inflation projected to hit 18% before January, the embattled currency will likely face sustained headwinds as we move toward and through Q4. Our attentions today turn to a host of macro data sets with Euro CPI inflation and US labour market date headlining the ticket.
- NZD/USD: 0.6080 - 0.6220 ▼
- NZD/EUR: 0.6080 - 0.6180 ▼
- GBP/NZD: 1.8880 - 1.9180 ▼
- NZD/AUD: 0.8850 - 0.8980 ▲
- NZD/CAD: 0.7980 - 0.8080 ▲