Home Daily Commentaries NZD crippled by weak domestic outlook and deteriorating risk sentiment

NZD crippled by weak domestic outlook and deteriorating risk sentiment

Daily Currency Update

In the absence of any headline newsflow, the New Zealand dollar remained under pressure amid a deteriorating risk narrative. Sentiment surrounding China’s economic outlook continues to weigh on the NZD as investors face up to a myriad of negative headlines and bad news. A loss of momentum perpetuated by rising concerns for the health of the property market has prompted investors to seek safe haven assets, exiting Asian equities and driving the Chinese yuan lower.

With the USD/CNH tracking toward 7.3, the NZD was dragged toward intraday and year-to-date lows at US$0.5944 through trade on Monday. With the domestic economy mired in recession and the global risk outlook deteriorating, we can expect sustained near-term headwinds and a possible move toward October 2022 lows just above US$0.5550.

Our attentions turn now to China activity data. Leading indicators suggest another soft print that will only compound the current risk-off mood. That said, a surprise uptick could offer a near-term reprieve and help push the NZD back toward US$0.60.

Key Movers

Amid the current risk-off environment, the USD dollar advanced against most counterparts, underpinned by haven demand and an uptick in US treasury yields. The DXY dollar advanced a quarter per cent through trade on Monday, as both the euro and GBP gave up ground, while the yen hit a fresh year-to-date low.

The euro briefly fell below 1.09, marking intraday lows at 1.0880, before finding support and pushing back toward 1.0910 on open this morning. The GBP crashed through 1.27 and 1.2650, marking lows below 1.2620, before tracking back toward 1.2680.

The yen failed to enjoy the same rebound, with early losses extended through the entirety of the daily session as the USD pushed through 145.50 and appear poised to extend on toward 146, in the absence of Ministry of Finance and Bank of Japan intervention. With the USD on the front foot, our attentions turn to China activity data, Japan GDP data, UK Labour market data, Canadian CPI and US retail sales.

With so many headline items crowding the docket, we expect volatility will continue.

Expected Ranges

  • NZD/USD: 0.5900 - 0.6020 ▼
  • NZD/EUR: 0.5400 - 0.5520 ▲
  • GBP/NZD: 2.1080 - 2.1320 ▲
  • NZD/AUD: 0.9180 - 0.9280 ▼
  • NZD/CAD: 0.8000 - 0.8100 ▼