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Kiwi range bound as markets ignore local data and policy expectations

Thursday 28 October, 2021

Daily Currency Update

NZD - New Zealand Dollar

The NZD remained firmly within a strict trading handle through trade on Wednesday, bouncing between 0.7130 and 0.7190. With little of note on the domestic docket the NZD looked offshore for direction. Tracking sideways through much of the domestic session, the Kiwi fell through the early hours of the European trading day before rallying on the heels of a broadly weaker USD overnight. Markets appear content in consolidating early October gains for now and we anticipate the NZD will maintain a narrow handle through the coming week and in the lead up to the Fed’s November policy update. The NZD remains vulnerable to broader market forces as investors continue to ignore domestic data and policy expectations. Our attentions today turn to a stacked macroeconomic ticket, headlined by the BOJ and ECB policy updates and a Q3 US GDP print. Watch support on moves toward 0.7130 and 0.7080, with resistance on plays approaching 0.72 at 0.7190.

Key Movers

The Canadian dollar was the days big mover up over half a percent overnight following the Bank of Canada’s decision to end its QE programme and bring forward its rate hike guidance into the middle of next year. With an increase in inflation projections and price pressures already stretching target ranges, the BoC looked to meet market expectations in a bid to control “upside risks of concern”. The BoC’s move highlights the pressure currently facing major central banks; how to combat rapidly rising inflation without curtailing a post pandemic recovery. The CAD uptick coupled with gains for the NZD and AUD helped drive the US dollar index lower on the day, pushing the BBDXY down 0.1%. A broadly weaker USD found support on an index level thanks to the euro and pound trading flat on the day. Neither pair offered little to excite markets as investors appear content in withholding larger directional plays until after the ECB policy update. We expect few fireworks from today’s meeting, instead the ECB will likely use it as a placeholder ahead of a broader QE announcement in December.

Expected Ranges

  • NZD/USD: 0.7130 - 0.7220 ▲
  • NZD/EUR: 0.6130 - 0.6200 ▲
  • GBP/NZD: 1.9080 - 1.9250 ▼
  • NZD/AUD: 0.9510 - 0.9590 ▼
  • NZD/CAD: 0.8820 - 0.8920 ▼