Home Daily Commentaries NZD rally consolidated as Omicron fears ease

NZD rally consolidated as Omicron fears ease

Daily Currency Update

The New Zealand dollar-maintained momentum through trade on Thursday, consolidating a break above 0.68 and marking fresh highs at 0.6840. Despite an unprecedented surge in COVID 19 case numbers around the world, markets continue to look past near-term headwinds and instead focus on growing evidence this latest strain will prove less severe than earlier mutations. Expectations the economic impact of Omicron will be shallower and shorter continue to grow, driving demand for risk assets and commodity-led currencies; lifting the NZD off supports at 0.67 US cents. With little headline macroeconomic data on hand and liquidity drying up Omicron headlines will continue to steer risk sentiment and govern direction into the end of the year. If scientific evidence can continue to support the already collected anecdotal evidence this most recent risk rally could see the NZD test 0.6850 and 0.69 US cents.

This is the last OFX Daily Commentary for 2021. We will return on the 4th of January. We thank you for your readership over the last 12 months and wish you a very happy and safe holiday season.

Key Movers

Haven currencies were again the days big losers as the recent resurgence in risk demand drove gains across risk assets and commodity-led currencies. The JPY and CHF led to losses across major currencies while the CAD notched fresh 6-day highs, the Norwegian Kroner rallied, and the AUD broke toward 0.7250. An uptick in oil prices and commodities helped drive gains across risk-sensitive currencies as the Omicron variant continues to show signs it will prove less severe than earlier strains and public health systems become better equipped to deal with the disease as new anti-viral drugs become available.

With little of note on hand to drive direction into the weekly close and holiday period, a sustained risk on run could add further downward pressure on the USD. We expect the world’s base currency will find support, at least through Q1 next year. The US domestic economic outlook continues to improve at a faster rate than major counterparts, while expectations for a tightening monetary policy grow, weighing on risk assets and driving USD demand. Our focus remains affixed to Omicron headlines today while US inflation data due January 7 will prove a key marker for direction over the coming weeks.

Expected Ranges

  • NZD/USD: 0.6700 - 0.6880 ▲
  • NZD/EUR: 0.5980 - 0.6080 ▲
  • GBP/NZD: 1.9520 - 1.9750 ▲
  • NZD/AUD: 0.9390 - 0.9460 ▼
  • NZD/CAD: 0.8720 - 0.8780 ▼