Home Daily Commentaries NZD continues fails to shrug off shift below 0.70 US cents

NZD continues fails to shrug off shift below 0.70 US cents

Daily Currency Update

NZD - New Zealand Dollar

The New Zealand dollar continues to bounce off supports at 0.70, struggling to break outside recent risk-off ranges despite an improvement in the underlying risk narrative. Sentiment improved through the Asian session as Evergrande survived another day and the PBOC announced a 120billion yuan liquidity injection, a clear signal it is willing to support financial markets through this most recent crisis. Having shifted off lows at 0.6995 the NZD shifted toward 0.7030, tracking sideways ahead of the Fed policy statement. Curiously, the NZD jumped to 0.7050 in the moments immediately following the meeting before correcting back toward supports at 0.70 as Fed president Jerome Powell began his address. The NZD opens this morning in much the same position as yesterday, clinging to supports. It currently buys 0.6995 US cents.

Our attentions today remain with the Evergrande saga and the subsequent shift in the underlying risk narrative.

Key Movers

Price action across currency markets was largely muted through trade on Wednesday, despite plenty of headline newsflow to drive direction. Having survived another day, the Evergrande saga did little to change the underlying risk narrative, while markets offered little in the way of response to the Fed and FOMC policy update. Policymakers affirmed their commitment to tapering QE as long as the recovery toward policy goals continue, indicating an announcement could be upcoming in December with a view to start reducing bond purchases in December, with a full wind up due by mid-2022. The positive outlook was affirmed by a shift in the Fed’s dot plot. A further two members brought forward their expectations for a rate hike, with half the board now of the view a rate hike next year will be appropriate. Despite this hawkish assessment, the pace of monetary policy normalisation is in line with market estimates, and yesterday’s meeting did little to change aspersions. The USD index is little change while the euro tested a break below 1.17 and sterling slipped below 1.3650.

Our attentions today remain with the Evergrande saga as the catalyst to spur risk direction, while the Bank of England policy meeting could spark cable volatility. While we don’t expect the MPC will make a move away from the current policy platform, markets are keenly attuned to any language that hints at a shift toward tighter policy conditions in 2022.

Expected Ranges

  • NZD/USD: 0.6970 - 0.7090 ▼
  • NZD/EUR: 0.5950 - 0.6020 ▲
  • GBP/NZD: 1.9290 - 1.9580 ▼
  • NZD/AUD: 0.9580 - 0.9720 ▼
  • ARS/CAD: 0.8890 - 0.9020 ▼