Home Daily Commentaries NZD recovers early risk-off dip yet remains vulnerable to geopolitical developments

NZD recovers early risk-off dip yet remains vulnerable to geopolitical developments

Daily Currency Update

The New Zealand dollar tumbled through trade on Monday, as a risk-off tone enveloped markets following the US strikes on Iranian Nuclear sites over the weekend. At its lowest, the NZD gave up nearly 1.5% on last week's close, falling below US$0.59, touching US$0.5885 before finding support. Sentiment shifted overnight with the US paring back its involvement. While Israel and Iran have continued to fire missiles at each other, the US has stepped back, tempering market fears and helping drive a rebound in risk.

The US dollar reversed its early risk-off gains, allowing the NZD to close flat on the day, climbing back above US$0.5970. While recovering against the USD, the NZD still struggled against other majors and was a notable underperformer on the day.

Our attention today remains squarely on Middle Eastern geopolitical tensions, while Canadian CPI, US consumer confidence and German IFO business data headline the macro ticket.

Key Movers

There has been plenty to digest over the last 24 hours, with sentiment shifting in response to the ever-evolving Israel-Iran conflict. After the initial risk-off move on open, the USD moved sharply lower through overnight trade on Monday as the US stepped away from further involvement. Market sentiment improved after Iran’s retaliatory strikes were intercepted, and no further attempts were made on key oil transport routes and production sites.

While Iran launched missiles toward a US air base in Qatar, the base had been largely evacuated over the weekend, and the strikes were preceded by a warning allowing Qatar to clear its airspace and for the US to intercept the missiles. The market's primary concern has been Iran striking sites that would disrupt the flow of oil through the Strait of Hormuz. With no sign Iran is planning further strikes that may target oil infrastructure, oil prices corrected lower, and the risk-off mood flipped.

European currencies have outperformed, and the yen was flat over the last 24 hours. Japan’s exposure to higher oil prices outweighed its appeal as a haven asset, and after tumbling to 148, it opens this morning back near 146. Direction will continue to be driven by the Israel-Iran conflict, with Canadian CPI, US Consumer confidence and German business survey providing macroeconomic colour.

Expected Ranges

  • NZD/USD: 0.5870 - 0.6080 ▲
  • NZD/EUR: 0.5100 - 05200 ▼
  • GBP/NZD: 2.2500 - 2.2800 ▲
  • NZD/AUD: 0.9200 - 0.9300 ▲
  • NZD/CAD: 0.8120 - 0.8280 ▲

Written by

Matt Richardson

OFXpert

As a Senior Corporate Client Manager, Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange. Matt has clients who he has been working with for over a decade, a testament to his knowledge and dedication in the field. Matt is also a regular contributor on Ausbiz, offering clear and precise updates on currency market trends, showcasing his ability to interpret complex financial data into actionable insights.