Turmoil in commodity markets see NZD/USD fall 0.24% despite ANZ 1% cash rate hike prediction
Wednesday 9 March, 2022
Daily Currency UpdateThe New Zealand dollar recorded a 0.24% drop to open this morning at 0.6807. The war in Ukraine continued to be the predominate driving force in financial markets, with turmoil in commodity markets in particular guiding the NZD. There were a number of developments overnight that had a meaningful impact on currency markets. The US and UK have both agreed to ban the import of Russian oil and gas, with the US going one step further and banning Russian LNG and coal as well. Brent Crude immediately jumped 3% to trade at 127 USD per barrel. Other commodities however were less straightforward, with nickel seeing a short squeeze drive its price above 100,000 USD yesterday. The London Metal Exchange suspended trading and even cancelled transactions to avoid a larger fallout. Other commodities took a breather, with wheat falling 6% while corn and copper erased their gains. Despite oil remaining well-supported, most commodity prices have come off the boil, which saw the NZD weaken.
The NZD however did find some support domestically with ANZ bank changing its Interest Rate prediction to back-to-back 50bps hikes by the RBNZ over the next two meetings. ANZ are calling for a 100bps of hikes by May, which immediately improved demand for the NZD.
Moving into Wednesday, all eyes will continue to follow developments in Ukraine.
Key MoversThe European Union oscillated significantly in overnight trade but ultimately appreciated 0.51%, to open this morning at 1.0907. While the EU didn’t join the oil embargo, they have made other steps which saw it well-supported. According to Bloomberg, the EU is discussing a plan to jointly issue bonds on potentially huge scales to finance energy and defence spending. The implications of such a bond would be widespread and could greatly help with the EU’s long term energy problems.
Adding further impetus to the EUR is President Zelensky’s latest statement, which turned conciliatory. Zelensky said he is no longer pressing for NATO membership for Ukraine and that he was open to a compromise on Donetsk and Luhansk, thus fulfilling two of Russia’s four demands that could end the war.
- NZD/USD: 0.6739 - 0.6875 ▲
- NZD/EUR: 0.6176 - 0.6301 ▲
- GBP/NZD: 1.9045 - 1.9431 ▼
- NZD/AUD: 0.9305 - 0.9418 ▲
- NZD/CAD: 0.8718 - 0.8823 ▲