NZD tracks sideways as markets consolidate recent gains
Wednesday 27 October, 2021
Daily Currency Update
NZD - New Zealand Dollar
The New Zealand dollar tracked sideways for much of Tuesday, bouncing between 0.7150 and 0.7190 in what was a relatively quiet trading session. Markets appeared content in consolidating positions following the recent surge across risk assets and commodity prices. Having edged toward intraday highs at 0.7195 and seemingly poised to break through 0.72 and test resistance at 0.7220 the NZD fell back toward the lower end of the daily range as the USD found momentum in the latter hours of the overnight session. While flat against the USD, the NZD continues to test fresh highs against the JPY, punching through 82 to touch 82.10 before consolidating at 81.70. The recent upswing in risk appetite is best evidenced by the Kiwi’s outperformance against the JPY. Having tracked sideways for the last 6 months, the NZD has surged through October, bouncing off 77 to touch highs at 82.3260. With little of note on today’s macroeconomic calendar, our attentions remain with the global risk narrative, while Australian CPI data, US durable goods orders and a Bank of Canada policy update dominate the international ticket.
Key MoversThe US dollar found some support overnight following a stronger than expected showing across consumer confidence data as Covid concerns ease. Having braced for a fall, the 4 point uptick was a welcome surprise as investors continue to drive gains across equity markets, with the S&P 500 up a further 0.7% on strong earnings reports. USD upside forced the EUR back below 1.16 touching lows at 1.1585 while GBP failed to hold onto gains above 1.38 and the JPY continues to test new lows. The JPY was the weakest of major currencies overnight, down another 0.4%. The correction in risk sentiment coupled with a pessimistic assessment of Japanese economic growth prospects and monetary policy expectations have forced the yen to give up any risk off gains enjoyed through Q3, allowing the USD to surge through 114.
Our attentions turn now to the Bank of Canada and its latest policy update. We expect it will significantly reduce is current asset purchase programme by as much as 50%, while greater interest lies in forward rate guidance. Markets have brought forward estimates for rate hikes, and we are keen to see if the BoC looks to push back.
- NZD/USD: 0.7120 - 0.7220 ▼
- NZD/EUR: 0.6120 - 0.6220 ▲
- GBP/NZD: 1.9070 - 1.9320 ▼
- NZD/AUD: 0.9480 - 0.9620 ▼
- NZD/CAD: 0.8820 - 0.8890 ▼