NZD gives up gains and slips below US$0.58 as momentum again behind USD
Friday 4 November, 2022
Daily Currency UpdateThe New Zealand dollar dropped back below US$0.58 overnight as markets continue to readjust expectations following the Fed’s latest policy offering. While the FOMC is expected to slow the pace of rate hikes next month, Fed Chair Jerome Powell’s messaging was overtly hawkish, suggesting the interest rate outlook will be higher for longer. US rates have surged in the aftermath extending gains through trade on Thursday and dragging the US dollar higher. The NZD is down around 1% since this time yesterday having touched intraday lows at US$0.5740. While the NZD enjoyed a brief reprieve, marking highs north of US$0.5900, momentum is again firmly behind the US dollar. Sustained uncertainty surrounding the global growth outlook, Chinese economic weakness, and a stubbornly hawkish Fed outlook will continue to weigh on the NZD and likely limit any significant upturn.
Our attentions turn now to US non-farm payrolls. While we anticipate employment growth will have slowed, the US labour market remains remarkably resilient. That said, commentary from a number of key corporate analysts suggest the landscape may be changing. With Morgan Stanley and Amazon reportedly set to announce hiring freezes and staff cuts, a softening in non-farm payroll performance may help drive some NZD upside into the weekly close.
Key MoversMomentum remains firmly behind the USD as fallout from the Federal Reserve’s latest hawkish policy offering fuels demand for the world’s base currency. The promise of higher rates and elevated risk aversion have helped propel the USD higher against a basket of major counterparts. The BB DXY index advanced three quarters of a percent through trade on Thursday and is now just 1.5% shy of its recent 18-year high. The Fed’s sustained hawkish outlook sits in stark contrast to the latest offerings proffered by other major central banks. The bank of England, while raising rates by 75 basis points, forecasts a significant contraction in GDP and a sharp downturn in inflation over the next three years. Bank of England Governor Bailey doubled down on the dovish tone, suggesting rates will rise less than is currently priced into financial markets. The Great British pound plunged in the wake of the BoE dovish statement, down nearly 2% and is the worst performing currency through the last 12 hours.
In other news, the euro is down around 0.7% under the weight of USD strength while the JPY is trading back above 148, as the backdrop of rising rates again adds pressure on the Ministry of Finance to intervene.
Our attentions today turn to US non-farm payrolls as a key marker guiding direction into the weekly close.
- NZD/USD: 0.5680 - 0.5840 ▼
- NZD/EUR: 0.5880 - 0.5980 ▼
- GBP/NZD: 1.9220 - 1.9680 ▼
- NZD/AUD: 0.9080 - 0.9220 ▲
- NZD/CAD: 0.7880 - 0.7990 ▼