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NZD tests another break above 0.72 as bond yields continue to climb

Friday 29 October, 2021

Daily Currency Update

NZD - New Zealand Dollar

The NZD rallied through 0.72 US cents Thursday, emboldened by a surge in risk sentiment, an uptick in domestic bond rates and a broadly weaker USD. The explosion in Australian bond rates spilled over into the domestic NZ rates market with short-term yields climbing sharply as investors continue to price in an uptick across the OCR. Having opened below 0.7150 the kiwi climbed steadily throughout the day before jumping higher overnight to touch intraday highs at 0.7212. Profit-taking saw the NZD edge marginally lower into this morning’s open slipping back below 0.72 to .7198 at the time of writing. Our attentions turn to a stacked macroeconomic docket with European inflation numbers and US key US labour market data and the PCE deflator index driving direction into the weekly close. We expect the NZD to hold onto support approaching 0.7130 while resistance at 0.7220 could be tested if risk sentiment continues to improve.

Key Movers

The US dollar gave up ground to most counterparts through trade on Thursday as risk sentiment improved, and the Euro tracked higher. The ECB and President Lagarde affirmed its commitments to a transitory inflation outlook, highlighting expectation price pressures will fall back below target through the latter half of 2022 and into 2023. Despite sticking to the script Lagarde refused to comment on whether the market was getting ahead of itself in pricing a rate hike next year, commenting “it’s not for me to say”, a potential admission the ECB’s current stance may be wrong. The ECB also confirmed the pandemic bond purchasing program will end as scheduled in March while deferring a decision to bolster its regular asset purchase program into December. Investors absorbed Lagarde’s comments and drove European yields and the shared currency higher, suggesting her push back was somewhat halfhearted. Having opened below 1.16 the Euro surged toward intraday highs at 1.1690. Our attentions turn now to European inflation data and US PCE numbers ahead of next week's all-important Fed policy update.

Expected Ranges

  • NZD/USD: 0.7130 - 0.7220 ▲
  • NZD/EUR: 0.6110 - 0.6200 ▼
  • GBP/NZD: 1.9080 - 1.9230 ▼
  • NZD/AUD: 0.9480 - 0.9570 ▲
  • NZD/CAD: 0.8840 - 0.8920 ▲