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Currencies range bound as bond prices continue to rise

Daily Currency Update

The New Zealand dollar tracked sideways through trade on Tuesday as markets look to consolidate last week's recovery and rebound off 15 months lows. Having bounced between 0.6625 and 0.6650 markets appeared content in watching global bond rates rise, while sidelining larger currency plays ahead of Thursday’s US CPI print. With expectations for aggressive US monetary policy change tempered in recent days, a blockbuster print above estimates could foster renewed demand for the world base currency, pushing the NZD back below 0.66 US cents. That said, we expect price pressure will have eased through January. With little of note on today’s ticket after the RBNZ has delayed the release of key domestic inflation expectations, we anticipate the NZD will remain range bound, consolidating around the key technical at 0.6640.

Key Movers

Price action across major currencies was modest through trade on Tuesday, as the market's attentions were instead drawn to the ongoing volatility and rapid appreciation across global bond rates. Bond markets rallied again with US, UK, European and even Japanese bonds rising across both 2- and 10-year notes as analyst rush to adjust to the central bank's hawkish pivot. In this environment, low yielding units underperformed, with the yen giving up 115.50 while the NZD and AUD were up on the day. The DXY dollar index extended back above 95.50 as the euro tested a break back below 1.14 and sterling offered little to excite investors. With little of note on today’s ticket, we look to US CPI data Thursday for macroeconomic stimulus.

Expected Ranges

  • NZD/USD: 0.6580 - 0.6690 ▲
  • NZD/EUR: 0.5780 - 0.5850 ▲
  • GBP/NZD: 2.0280 - 2.0520 ▲
  • NZD/AUD: 0.9250 - 0.9530 ▼
  • NZD/CAD: 0.8380 - 0.8480 ▲