NZD lower amid lockdowns and the promise of monetary policy normalisation
Thursday 7 April, 2022
Daily Currency UpdateThe New Zealand dollar underperformed through trade on Wednesday briefly slipping below 0.69 US cents. A broad risk-off backdrop spurred by the promise of a more aggressive push toward central bank policy normalisation and escalating fears sustained COVID-led shutdowns in China will further hamper the broader global recovery, prompted a correction across risk assets and commodity led currencies. Having tracked sideways through the domestic session, the NZD fell steadily overnight slipping through 0.6950 and 0.69 to touch intraday lows at 0.6898. Losses spilled beyond the USD, with the New Zealand dollar giving up ground to other major counterparts, falling below 0.6350 against the euro, 0.53 against the GBP and 86 against the yen. With little of note on today's ticket, our attentions remain with global bond and yield rates as a marker of the underlying risk narrative, while central bank commentary and the war in Ukraine continue to dominate direction.
Key MoversA risk-off backdrop dominated direction through trade on Wednesday, bolstering the USD and other key safe haven assets. The DXY dollar index jumped two tenths of a percent marking fresh 18 month highs, while the euro and GBP traded flat. Risk demand was tepid amid concerns the latest lockdown in Shanghai will further dampen Chinese growth prospects and exacerbate global supply chain shortages, extending near term inflationary pressures. This coupled with confirmation the Federal Reserve will adopt a more aggressive approach to monetary policy normalisation spurred a definitive risk-off shift and move away from the trend of the last four days. The FOMC minutes showed most members supported one or more 50 basis point rate hikes and a re-balancing of the balance sheet. With monetary policy expectations a key driver of direction, our attentions turn now to the ECB’s latest meeting account. We are keenly attuned to anything that affords greater insight into an accelerated tapering schedule and the possibility of rate hikes later this year.
- NZD/USD: 0.6870 - 0.7030 ▼
- NZD/EUR: 0.6280 - 0.6390 ▼
- GBP/NZD: 1.8750 - 1.9050 ▲
- NZD/AUD: 0.9150 - 0.9250 ▲
- NZD/CAD: 0.8660 - 0.8720 ▲