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NZD outperforms and punches back through 0.70

Wednesday 23 June, 2021

Daily Currency Update

NZD - New Zealand DollarThe New Zealand dollar outpaced most major counterparts on Tuesday as it continues to retrace last week's heavy sell off. Having slipped below 0.69 toward 6-month lows on Friday, the NZD has clawed its way back through 0.70 to mark intraday highs at 0.7025. A softer USD and a correction in expectations surrounding the reflation narrative have helped drive the NZD recovery. We anticipate the kiwi will continue to enjoy support as it moves back toward recent ranges between 0.71 and 0.7315. However, investors and markets are evidently more cautious, and any extended upside will likely be more measured with near term risks to the downside in play as demand for risk fluctuates. Our focus remains with the reflation narrative and Central Bank commentary.

Key Movers

The momentum behind the USD has faded, with the world’s base currency giving up ground to all major counterparts, excluding the yen. A string of commentary from Key Fed officials leaned away from previous hawkish rhetoric and toward a more centrist outlook, suggesting interest rate hikes as “Still quite a ways off” and that the timetable to taper asset purchase will not begin until later this year or early 2022. The comments helped moderate market expectations and, in some sense, ensure price action regains a sense of lucidity. With US treasury rates range bound, we expect the USD will continue to give up last week's gain. The euro extended its recovery toward 1.1950 and sterling punched back through 1.39 to mark intraday highs at 1.3961. Our attentions now turn to a slew of PMI data, a key marker in assessing possible ongoing inflation pressures. We are keenly attuned to changes in input costs. We expect a tentative return to risk assets and a sustained USD correction, yet acknowledge the market remains on edge and there are definite short-term risks that could prompt another risk off rally.

Expected Ranges

  • NZD/USD: 0.6920 - 0.7130 ▼
  • NZD/EUR: 0.5840 - 0.5920 ▲
  • GBP/NZD: 1.9710 - 2.0010 ▼
  • NZD/AUD: 0.9230 - 0.9320 ▲
  • NZD/CAD: 0.8590 - 0.8710 ▲