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NZD breaks 15-month lows as momentum squarely behind the US dollar

Monday 31 January, 2022

Daily Currency Update

The New Zealand dollar continued its move lower through trade on Friday, testing levels not seen in the last 15 months. The sustained and extraordinary rise in global inflation pressures coupled with expectations for an extended period of monetary policy tightening and a broad slowdown in global growth prospects have pushed investors away from risk correlated currencies and toward high yield haven assets. Measures for risk appetite have continued to fall, marking fresh lows and highlighting the driver behind this recent downward correction. Having tested resistance above 0.6850 just two weeks ago the NZD marked fresh lows at 0.6530 on Friday, a level not seen since September 2020. With little of note on today’s ticket we see little respite for the NZD. The US dollar continues to find new sources of momentum as markets try to grapple with shifting expectations for monetary policy amid a low growth, high inflation environment.

Key Movers

Price action across the majors was choppy through trade on Friday with most maintaining a relatively narrow range amid conflicting macroeconomic data sets and rising geo-political tensions. US treasury yields fell after the US employment cost index printed lower than expected, while China’s PMI’s slipped toward 50, the mark that delineates growth or contraction and Euro area confidence fell to a nine-month low. The dollar index tested new highs above 9, touching 97.43 before edging lower into the close, while the Euro clung tom moves approaching 1.11 and the GBP slipped below 1.34 and the Yen again gave up 115. Momentum remains firmly behind the USD for now as our attentions turn to the ECB and Bank of England policy updates with more from Fed speakers expected ahead of labour market data and key inflation indicators.

Expected Ranges

  • NZD/USD: 0.6480 - 0.6630 ▼
  • NZD/EUR: 0.5930 - 0.5820 ▼
  • GBP/NZD: 2.0250 - 2.0590 ▲
  • NZD/AUD: 0.9320 - 0.9420 ▲
  • NZD/CAD: 0.8290 - 0.8380 ▼