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Kiwi back above 70c

Monday 30 August, 2021

Daily Currency Update

The New Zealand dollar is trading higher against its US counterpart as markets reacted positively to the eagerly awaited Jackson Hole speech by the US Federal Reserve Chair Jerome Powell. The NZD/USD rate ascended from 0.6933 to trade above 0.7000, reaching an intraday high of 0.7019. In line with the theme of commodity currency outperformance, the AUD was also a strong performer, rising from 0.7222 to 0.7317 which saw the AUD/NZD trade in a relatively tight range between 1.0415 and 1.0445. With the New Zealand dollar heading into the week north of 70 and a relatively quiet data docket today, there are a few key releases out that could drive near term direction. Friday’s non-farm payrolls data will be closely watched, especially given Fed Chair Powell’s admission that the decision of when to commence the tapering of quantitative easing measures rests on the strength of the labour market. The market is expecting 750k new jobs to be added and the unemployment rate to post at 5.2%. Given the recent concerns of a slowdown in Chinese growth and the New Zealand economy’s reliance on China, Chinese PMI’s will be of interest to New Zealand dollar traders who will be keen to see that the recent Delta outbreak is now under control. On the local front, local Covid-19 case numbers will continue to be watched. From a technical perspective, markets will want to see if NZD/USD can extend its gains above resistance levels in the early 0.70’s. On the downside, first lines of support can be seen around the 0.6930 handle, with minimal further supports on approach to last weeks lows around 0.6800.

Key Movers

As we touched on above, the main story impacting prices in financial markets has been the Jackson Hole speech from Fed Chair Powell. There were a few key things to note from the speech which have been latched onto by markets and led to a more risk on setting. Firstly, in Powell’s cited that ‘clear progress’ had been made against the Fed’s criteria for tapering quantitative easing, supporting his view that tapering would likely start later this year if the economy continued to ‘evolve as expected’. He was deliberate in his insistence that a start to tapering does not signal am impending rate hike, highlighting the ‘substantially more stringent test’ required for a rate hike. Further to this, he also reiterated previous sentiments that the Fed still views the current inflationary pressures as mainly transitory and confined to specific sectors. These dovish sentiments from the Fed Chair were digested positively by markets with the S&P500 rallying nearly 1% to post a fresh record high. The safe haven USD was weaker across the board as high beta currencies strengthened. Commodity prices were also buoyed by the news, as well as a broadly rosier outlook for global growth, which boosted commodity currencies such as the AUD, NZD, NOK and CAD.

Expected Ranges

  • NZD/USD: 0.6900 - 0.7060 ▲
  • NZD/EUR: 0.5890 - 0.6000 ▲
  • GBP/NZD: 1.9590 - 1.9770 ▼
  • AUD/NZD: 1.0400 - 1.0470 ▼
  • NZD/CAD: 0.8790 - 0.8880 ▲