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Kiwi downturn continues as USD maintains momentum

Friday 28 January, 2022

Daily Currency Update

The New Zealand dollar offered little resistance in the face of a broad-based USD extension, giving up 0.66 US cents to test key technical resistance levels. Markets largely ignored yesterday’s domestic CPI print despite price pressures reaching their highest level in 31 years. NZ CPI touched 5.9%, marginally shy of the 6% barrier some commentators feared. While surpassing RBNZ estimates, the print failed to drive meaningful change in NZ monetary policy expectations as investors' attentions remain affixed to Fed policy change. The NZD fell over 1.5% on Thursday, as momentum remains squarely behind the world's base currency following Wednesday's FOMC policy meeting. Markets continue to digest Fed Chair Jerome Powell’s Hawkish comments, driving short term rates higher and fueling expectations for an aggressive monetary policy shift. Having broken 0.66, the NZD touched intraday lows at 0.6570 with little now stopping an extension toward 0.65 US cents.

Key Movers

The US dollar maintained its momentum through trade on Thursday with no major counterpart immune to the surge in demand for the world’s base currency. While commodity sensitive currencies have born the brunt of this week’s correction, the euro, GBP and JPY have all suffered steep and aggressive downward corrections. The euro, having traded above 1.14 just two weeks ago, plunged below 1.12 marking intraday lows at 1.1139, while the pound collapsed through 1.34 testing lows at 1.3370. Even the yen wasn’t immune from the broader USD push, giving up 115 and now firmly on track to test new year lows above 116. Our attentions remain affixed to short term rate performance, while US quarterly employment costs will provide a key insight into US wage inflation. Sustained wage growth is an important factor driving Fed policy decisions, meaning there is ample scope for ongoing volatility into the weekly close.

Expected Ranges

  • NZD/USD: 0.6530 - 0.6670 ▼
  • NZD/EUR: 0.5850 - 0.5950 ▼
  • GBP/NZD: 2.0080 - 2.0420 ▲
  • NZD/AUD: 0.9280 - 0.9420 ▼
  • NZD/CAD: 0.8320 - 0.8450 ▼