Home Daily Commentaries NZD posts gains for second consecutive day as USD weakens

NZD posts gains for second consecutive day as USD weakens

Thursday 8 December, 2022

Daily Currency Update

The New Zealand dollar has succeeded to post gains of up to 0.75% on the day off the back of the US dollar weakening as a result of Covid restrictions easing in China and market fears of the impacts of further rate hikes. The Chinese government has hinted at the possibility of relaxing its COVID-zero policy after realisations that its people will have to be prepared to live with the virus, resulting in the Greenback coming under selling pressure. There have been reports that some people with mild or no symptoms can isolate at home and no longer need to show test results before entering some venues. Market sentiment around fears that further interest rate hikes by the Federal Reserve will only push the US economy into recession has continued to prevail, aiding the New Zealand dollar to appreciate, currently trading around the US$0.6350 level. With no data to be released on the domestic ticket, the market will be eagerly monitoring the performance of the Greenback with some analysts at ANZ bank stating that even if US dollar depreciation continues, and New Zealand dollar appreciation eventuates, volatility indicates it will be a “bumpy ride”. Nonetheless, the New Zealand dollar has been one of the top-performing currencies this month, having already shown a near 1% gain against the US dollar, and 1.89% gain against the Australian dollar, and currently trading around A$0.9450

Key Movers

The US dollar continued to post losses against the majority of other major currencies, irrespective of the overall bleak market mood. Albeit these losses were maintained, there are growing market concerns that the US economic landscape isn’t as fruitful as their currency’s performance over the recent months has foretold. During the US session, further risk-off fuel came by way of Russian President Vladimir Putin re-sparking nuclear war fears with the possibility that Russia and its allies might need to use nuclear weapons to defend themselves.  Following a surge in demand for government bonds following this news from Russia, The US treasury yield curve inverted the most in 40 years off the back of the risk-off sentiment surrounding US economic health and future rate hike uncertainty. Failing to make a gain on the day, the 2-year note yields 4.26%, and the 10-year note yields 3.43%, currently. On their domestic ticket, nonfarm productivity succeeded to surpass the market forecast of 0.6%, coming in at 0.8%. With an annualised growth of 2.3%, the third quarter of the year's Gross Domestic Product for the Eurozone performed better than expected. It succeeded in surpassing market expectations of 0.2% and posted 0.3%. With the next level of resistance at 1.060 for the EUR/USD, the market will look to further USD weakness for a run to this level. We also expect European Central Bank President Lagarde to issue a speech this evening, providing an insight into how the Eurozone expects to react to the drastically shifting global economic environment. In line with expectations, the Bank of Canada increased its benchmark interest rate by 50 basis points to 4.25%. While conceding that inflation is still high, policymakers pointed out that there is mounting evidence that the tighter monetary policy is constraining domestic demand. Currently, the CAD/USD has lost 1.30% this week and trading around the C$0.7300 mark. The GBP/USD and JPY/USD have both succeeded to hold onto gains off the back of a weakened US dollar, currently with 0.67% and 0.37% upticks respectively.

Expected Ranges

  • NZD/USD: 0.6300 - 0.6380 ▲
  • NZD/EUR: 1.6611 - 1.6474 ▼
  • GBP/NZD: 1.9125 - 1.9245 ▲
  • NZD/AUD: 0.9425 - 0.9450 ▼
  • NZD/CAD: 0.8675 - 0.6620 ▼