NZD powers through 0.70 US cents
Wednesday 1 September, 2021
Daily Currency UpdateNZD - New Zealand DollarThe New Zealand dollar was the standout performer through trade on Tuesday, outpacing major counterparts, surging back through 0.70 US cents. Rising inflation expectations and selling price intentions amplified calls for the RBNZ to begin tightening interest rates from October, despite the sustained and extended COVID lockdown dampening the near-term business outlook. The RBNZ has been at pains to highlight its commitment to neutral monetary policy, suggesting economic support through this latest lockdown is a fiscal responsibility, while controlling activity and managing an overheating economy is their first mandate. Having pushed through 0.70 through the middle of the local session, the NZD stormed higher to touch intraday highs just shy of 0.7070. With little obvious catalyst sparking the upswing, you would forgive markets for correcting the drive overnight, but the NZD managed to hold onto gains amid month end flows and a softer US dollar. The currency has been clearly undervalued for some time, and perhaps this is the beginning of a broader correction toward fair value. Having outperformed against the USD, the Kiwi enjoyed gains against other key crosses, punching through 0.96 against the AUD, marking a fresh 17-month-high. A diverging central bank outlook and domestic economic outlook could see the NZD extend gains against its antipodean counterpart toward 0.98.Our attentions turn now to Friday’s non-farm payroll print, and we anticipate ranges will be largely contained in the lead up to the drop.
Key Moversluding the NZD and AUD outperformance price action across major currencies was largely muted through trade on Tuesday. The US dollar edged lower as investors squared month end flows, with the dollar index marking intraday day lows at 92.40. The EUR found some support through the local session, touching 1.1845 following a surprise and sharper than anticipated jump in annual inflation. While supply constraints and rising input costs drove the outperformance it does set up the possibility the ECB may need to consider a reduction in emergency bond purchases. Sterling tracked sideways through much of the day, bouncing between 1.3750 and 1.3800. Our attentions turn now to US manufacturing PMI and leading ADP employment date, while typically a poor marker of wider labour market performance, any insight could spark a shift in direction as markets attempt to price in a program of FOMC tapering.
- NZD/USD: 0.6950 - 0.7100 ▲
- NZD/EUR: 0.5880 - 0.6020 ▲
- GBP/NZD: 1.9380 - 1.9750 ▼
- NZD/AUD: 0.9550 - 0.9680 ▲
- NZD/CAD: 0.8780 - 0.8930 ▲