NZD creeps upward as Fed leaves rates on hold
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Daily Currency Update
The New Zealand dollar edged marginally higher on Wednesday amid receding fears the US will be drawn into the Israel-Iran conflict and a further decline in US treasury yields. Having eyed a break below US$0.60, the NZD edged back toward session highs just short of US$0.6050. Risk sentiment improved after President Trump confirmed Iran has reached out and wanted to negotiate, helping to ease fears the conflict will escalate. Having touched US$0.6047, the NZD faded into the morning’s open. The FOMC left rates on hold, a decision we anticipated and a move in line with market pricing. Policymakers are seeking further clarity as to the impacts of the Trump administration’s policies on inflation and growth. Fed Chairman Powell noted that inflation remains elevated and that there is a high level of uncertainty, meaning the board needs to be well-placed to respond. Market pricing for two 25-point rate cuts through the end of the year firmed after the meeting, and treasury yields fell.Our attentions turn now to Australian employment data, the Bank of England policy meeting, and ongoing geopolitical developments in the Middle East.
Key Movers
Price action among major currencies was well contained on Wednesday as the Fed left rates on hold and tensions in the Middle East seemingly eased. President Trump confirmed Iran had reached out to negotiate, helping alleviate fears the US would be drawn into the conflict. Equities traded higher amid improved risk sentiment, and the US dollar index continued to trade within its narrow range overnight. The euro opens this morning marginally lower, slipping back below 1.15 while the GBP slid below 1.3450. In other news, the Swedish kroner underperformed after the Riksbank cut rates by 25 basis points. The move was expected, yet policymakers hinted toward further cuts, a dovish stance that surprised markets.Today, our attentions turn to the Bank of England policy meeting. We expect the Monetary Policy Committee (MPC) will leave rates on hold. Norway’s Norges Bank is also expected to leave rates on hold, while Switzerland’s SNB is expected to cut rates by 25 basis points. With little else of note on the macro ticket, geopolitical headlines will continue to drive direction and sentiment.
Expected Ranges
- NZD/USD: 0.5980 - 0.6080 ▲
- NZD/EUR: 0.5200 - 0.5300 ▲
- GBP/NZD: 2.2100 - 2.2400 ▼
- NZD/AUD: 0.9200 - 0.9300 ▼
- NZD/CAD: 0.8200 - 0.8300 ▲