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NZD pushes toward 0.70 on a sustained improvement in risk sentiment

Tuesday 5 April, 2022

Daily Currency Update

The New Zealand dollar climbed back above 0.6950 on Monday on the heels of a sustained improvement in risk sentiment. With little headline data to drive direction markets simply continued last week's risk on narrative extending gains across key equities and supporting traditional risk correlated currencies. An uptick across key risk indexes suggests sentiment has shifted toward risk assets and if the improvement is sustained it could help support a push toward 0.70 US cents. With little action in domestic rates our focus remains on the war in Ukraine and next weeks RBNZ policy meeting. With an 80% chance of a 50-basis point rate hike priced in there is scope for a surprise to the downside. There are growing signs that a recession may be looming as consumer confidence falters and key sectors of the economy remain impacted by COVID-19 restrictions. The RBNZ could well adopt a measured approach sustaining its current pace of hikes at 25 basis points.

Key Movers

The Euro underperformed through trade on Monday, giving up ground to most major counterparts as safe-haven currencies struggled in the face of risk on shift and commodity currencies surged. European bond yields fell some 5 basis points amid fears further sanctions will exacerbate supply-side inflation pressures and dampen future growth expectations. Having opened a tick above 1.1050 the single currency fell through 1.10 to mark intraday lows at 1.0960. The Euro sell-off had some spillover implications, dampening demand for the GBP and forcing a momentary break below 1.31. With commodity currencies surging the biggest moves came on the crosses with the NZD, AUD and CAD all enjoying strong gains against the Euro and GBP, up over 1% in some instances. Today’s macroeconomic docket remains largely bare with the war in Ukraine and shifting monetary policy expectations expected to drive direction through the near term.

Expected Ranges

  • NZD/USD: 0.6880 - 0.7020 ▲
  • NZD/EUR: 0.6250 - 0.6390 ▲
  • GBP/NZD: 1.8780 - 1.9020 ▼
  • NZD/AUD: 0.9180 - 0.9250 ▼
  • NZD/CAD: 0.8650 - 0.8720 ▲