NZD underperforms amid uptick in US treasuries and risk-off mood
Daily Currency Update
The New Zealand dollar underperformed through trade on Monday as a risk-off mood permeated markets, propping up the USD and other haven assets. With little headline newsflow and tier 1 data on hand to drive direction, investors appeared content in taking stock of recent moves, pausing to take a breath and reassess positions.US treasury yields tracked higher through the domestic session, extending the move overnight and forcing the NZD to give up gains won on Friday. Having dipped back below US$0.62, the NZD tracked toward intraday lows just north of US$0.6150, before finding support and edging back to US$.6170 leading into this morning’s open.
With markets uber sensitive to US monetary policy expectations and the NZD entering overbought territory last week, we were bound for a correction ahead of next week's FOMC policy meeting. That said, as long as markets continue to price an end to the Fed tightening cycle the NZD should enjoy sustained support and a return to the trading range it enjoyed through the first half of the year, before the Q3 sell-off.
Key Movers
The US dollar rebounded through trade on Monday, clawing back losses suffered into last week's close as markets adopt a risk-off tone amid a series of hefty moves over the last 2 weeks. US treasury yields rebounded, clawing back much of the Friday sell-off and adding 10-12 points across the curve, helping lift the dollar index.The euro slid back below 1.0850, while the sterling gave up 1.27 and 1.2650. The Japanese yen proved more resilient, finding support on haven plays, while benefiting from the recent correction in global rates. Having forced a break below 147, the JPY gave up intraday highs just south of 147.50, before forcing the dollar back toward 147.25.
The market remains incredibly sensitive to US monetary policy expectations and our attention turns now to US ISM services data and the JOLTS labour market report. With the US economy slowing down and the labour market softening a print outside expectations could well drive volatility into Wednesday’s open.
Expected Ranges
- NZD/USD: 0.6050 - 0.6250 ▼
- NZD/EUR: 0.5620 - 0.5720 ▼
- GBP/NZD: 2.0300 - 2.0600 ▲
- NZD/AUD: 0.9280 - 0.9350 ▲
- NZD/CAD: 0.8300 - 0.8400 ▼