NZD pushes toward 0.70 on a sustained improvement in risk sentiment

Daily Currency Update

The New Zealand dollar climbed back above 0.6950 on Monday on the heels of a sustained improvement in risk sentiment. With little headline data to drive direction markets simply continued last week's risk on narrative extending gains across key equities and supporting traditional risk correlated currencies. An uptick across key risk indexes suggests sentiment has shifted toward risk assets and if the improvement is sustained it could help support a push toward 0.70 US cents. With little action in domestic rates our focus remains on the war in Ukraine and next weeks RBNZ policy meeting. With an 80% chance of a 50-basis point rate hike priced in there is scope for a surprise to the downside. There are growing signs that a recession may be looming as consumer confidence falters and key sectors of the economy remain impacted by COVID-19 restrictions. The RBNZ could well adopt a measured approach sustaining its current pace of hikes at 25 basis points.