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NZD steady ahead of US non-farm payroll data

Friday 8 October, 2021

Daily Currency Update

NZD - New Zealand Dollar

The New Zealand dollar edged higher through trade on Thursday, up three tenths of a percent to test a break above 0.6950. Market sentiment has improved through the last 24 hours, amid reports a short-term deal to raise the US debt ceiling has been struck and Russia has extended support to Europe in a bid to stabilise gas prices. Having tracked sideways through much of the domestic session, the NZD broke above 0.6920, touching intraday highs at 0.6943. Covid-19 case numbers remain stubbornly between 20 and 40 new infections a day and as the country explores the path to living with Covid, the promise to trial rapid antigen testing has garnered widespread business support. Despite the risk on undercurrent, investors were reluctant to significantly extend the rally ahead of today’s all important US non-farm payroll print. The last labour market data set available ahead of the Fed’s November policy meeting will be crucial in pricing expectations for QE tapering. Leading indicators suggest a modest rebound through September with some 500,000 jobs added. Anything near this handle should be enough for the FOMC to begin tapering discussion, while a significant miss to the downside could drive uncertainty into the weekend.

Key Movers

Safe haven currencies were the days big losers as the USD, CHF and JPY all underperformed when valued against the CAD, AUD and NZD. The Dollar index fell 0.1% on the day, propped up by further euro weakness. The single currency found some support on moves approaching 1.1550, buoyed by news Russia will step in and increase gas supplies through its Ukrainian pipeline, in a bid to stabilise the natural gas market. Gas prices in Europe and the UK edged marginally lower on the day, down around 5% overnight. The panic that swept markets through the start of the week has eased for now, yet prices remain well above those just a few months ago and ongoing shortages continue to pose concerns and will continue to weigh on both the euro and the Great British pound. Risk demand found added support following headlines announcing a short-term fix to US debt ceiling constraints had been struck. While the can has been simply kicked down the proverbial road, it at least removes a key risk event from the near-term narrative. Our attentions turn now to US non-farm payroll numbers. Labour market performance has long been chronicled as critical to guiding fed policy direction and with the Fed set to meet on November 4th this will be the last labour market profile available. A strong read near expectations should firm bets the Fed will begin discussions to taper bond purchases in November, while a miss to the downside could drive volatility into the weekly close.

Expected Ranges

  • NZD/USD: 0.6880 - 0.7020 ▼
  • NZD/EUR: 0.5970 - 0.6020 ▲
  • GBP/NZD: 1.9480 - 1.9770 ▼
  • NZD/AUD: 0.9420 - 0.9550 ▼
  • NZD/CAD: 0.8670 - 0.8770 ▼