NZD unable to mount recovery back toward fair value
Tuesday 6 July, 2021
Daily Currency UpdateThe New Zealand dollar offered little to excite investors through trade on Monday, drifting sideways for much of the day unable to shake a 20-point range. Having been dragged back above 0.70 US cents through the end of last week the NZD bounced between 0.7015 and 0.7037 as a lack of liquidity and little headline data allowed investors to maintain a narrow handle ahead of key US services data this evening and tomorrow’s FOMC meeting minutes. The NZD has struggled to extend gains beyond 0.7050 since giving up 0.7315 mid last month. Despite elevated commodity prices, growing risk demand and a potentially favourable central bank outlook investors appear wary in advancing the recovery back toward fair value amid near term concerns linked to the Delta variant and uncertainty regarding the broader economic recovery. With little of note on today’s domestic docket we look across the Tasman to the RBA policy update and any spillover that may emerge post press conference.
Key MoversFourth of July celebrations meant liquidity across major currencies remained thin through trade on Monday, prompting little price action and narrow ranges. The Euro, GBP, CAD and JPY all tracked sideways reluctant to extend moves outside a 0.2% plus/minus. The Euro did test a break back toward 1.19, touching intraday day highs at 1.1880 after service PMI data surpassed expectations. However, a dip in investor confidence saw the combined unit slip back toward 1.1850 before edging slightly higher into this morning’s open. Our attentions turn now to the US ISM service PMI index. Having touched near record highs in May there is an expectation the index will correct lower in June, however as the US economic recovery gather pace a surprise to the upside is not out of the question. We are keenly attuned to the underlying indicators held within the dataset, particularly input costs. With inflation pressures growing a sustained uptick in through costs driven by supply constraints will likely mean transitory price pressures will remain in play through the near term.
- NZD/USD: 0.6950 - 0.7080 ▲
- NZD/EUR: 0.5880 - 0.5950 ▼
- GBP/NZD: 1.9580 - 1.9820 ▲
- NZD/AUD: 0.9280 - 0.9350 ▼
- NZD/CAD: 0.8630 - 0.8730 ▼