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Kiwi outpaces major counterparts amid rejuvenated risk demand

Thursday 2 September, 2021

Daily Currency Update

NZD - New Zealand Dollar

The New Zealand dollar upswing continued through trade on Wednesday, consolidating a break above 0.70 US cents and closing in on a push through 0.71. A new season bought with it an uptick in demand for risk as investors sought to drive equities and commodity currencies higher amid waning concerns the Fed will be forced to accelerate its timeline of QE tapering. Leading labour market data suggested the slowdown in employment growth through July has carried into August with ADP employment data printing much weaker than anticipated. US dollar softness allowed the NZD to mark new highs not seen since the beginning of August, touching 0.7070. With labour market performance key to Fed policy decision-making, our attentions turn to Friday’s non-farm payroll print for a completed picture. A soft read could help propel the NZD through the next level of resistance at 0.71, opening the door to a possible extended run toward 0.73 and 0.7315, the high through the first six months of the year.

Key Movers

The US dollar is lower across the board this morning having given up ground to all major counterparts. The dollar index slipped 0.25% as investors scrambled to adjust expectations leading into Friday’s non-farm payroll print. Leading employment data released Wednesday suggests the slowdown in employment growth seen in July may carry through to August as the impacts of the Delta variant are felt across the economy. ADP private payrolls printed well below expectations, suggesting a lift of just 374K. With markets anticipating labour growth closer to 750-800K the soft read assuages fears the Fed will be forced to bring forward a program of QE tapering. The promise of an extended period of uber accommodative monetary policy helped drive demand across risk assets on Wednesday. Our attentions now turn to Friday’s Non-farm payroll print for a complete picture of labour market conditions. A print below 700K won’t meet the Fed’s criteria “for substantial progress” and could well see an announcement regarding the tapering of bond purchases delayed into November. As risk sentiment improves and fed expectations shift the USD could come under ongoing pressure.

Expected Ranges

  • NZD/USD: 0.6950 - 0.7120 ▲
  • NZD/EUR: 0.5920 - 0.6020 ▲
  • GBP/NZD: 1.9380 - 1.9760 ▼
  • NZD/AUD: 0.9520 - 0.9650 ▲
  • NZD/CAD: 0.8840 - 0.8950 ▲