NZD marks new 2-year low amid European political uncertainty and elevated recession fear
Friday 15 July, 2022
Daily Currency UpdateThe New Zealand dollar came under sustained selling pressure through trade on Thursday, yet found support and starts the day in much the same position as Thursday’s open. With little of note on the domestic macroeconomic ticket, the NZD tracked sideways through the local session bouncing between 0.6100 and 0.6130 US cents. Having marked session highs at 0.6132, the NZD then fell steadily through the first half of the overnight session. Risk appetite soured and commodity prices fell as markets regrouped and fully digested the implications of yesterday’s shockingly high US CPI print. Fears sustained inflation pressures will tip the global economy into recession coupled with new political drama in Italy, forced the NZD toward intraday lows at 0.6060. Much like its antipodean counterpart, the NZD has struggled to find its footing in a market dominated by the USD. The NZD continues to mark a series of lower lows maintaining a bearish bias, which we expect will continue through the near term. With the NZD direction closely correlated with euro fortunes through the last 3 months, next week’s ECB policy meeting and Nord Stream 1 gas line re-opening prove critical in governing short-term outcomes.
Our attentions today turn to Chinese activity data, US retail sales and consumer sentiment data for direction into the weekly close.
Key MoversThere was ample price action across major currencies through trade on Thursday with the euro again testing a break below parity, while the CAD gave up its post BoC gains and the GBP marked fresh 2-year lows. The USD remains firmly in charge, marking new highs as political uncertainty in Italy forced the euro to again test a break below parity. Reports Premier Draghi offered his resignation after Italy’s second largest party opted to boycott a confidence vote prompted a rapid uptick in Italian 10-year bonds and is the last thing the embattled euro needs. With the ECB attempting to manage elevated and sustained inflation against the lacklustre growth and fears of recession, Italian political uncertainty and surging bond rates provide just another hurdle, adding pressure on the ECB to offer greater transparency on its anti-fragmentation tool designed to protect bond rates in southern European states. The euro plunged to intraday lows at 0.9950 before finding support.
The Canadian dollar was the day’s worst performer giving up gains won in the wake of the BoC’s 100-point rate adjustment, collapsing under weaker oil prices. Brent crude fell as much as 5%, as recession fears continue to rise following a report US gasoline demand has fallen to its lowest level in nearly 30 years.
With the GBP touching 2-year lows below 1.18 and the yen giving up a move above 139, our attentions turn to Chinese activity data, US retail sales and consumer sentiment data for direction into the weekly close.
- NZD/USD: 0.6030 - 0.6170 ▼
- NZD/EUR: 0.6070 - 0.6150 ▲
- GBP/NZD: 1.9220 - 1.9520 ▼
- NZD/AUD: 0.9030 - 0.9130 ▲
- NZD/CAD: 0.7940 - 0.8080 ▲