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NZD continues to press 0.72 cents as attentions turn to slew of central bank data

Tuesday 2 November, 2021

Daily Currency Update

NZD - New Zealand Dollar

The New Zealand dollar remains pined within a narrow trading handle unable to extend gains beyond 0.7220 yet well supported on falls toward 0.7130. Price action across currency markets was relatively modest through trade on Monday and the NZD tracked sideways through the domestic session. Uncertainty surrounding the stability of the Chinese property market and weaker than anticipated PMI data placed pressure on regional commodity currencies. China’s outlook remains uncertain as its policy of COVID zero continues to disrupt supply chains and production as snap lockdowns dampen domestic demand. Having touched intraday lows at 0.7160 the NZD found support overnight amid a healthy improvement in risk sentiment, touching highs at 0.7195. Our attentions turn now to commentary form RBNZ governor Orr as he address the unsustainable rise in house prices and the RBNZ’s role ahead of tomorrow Financial Stability report, while the RBA policy update provides an interesting wrinkle ahead of the Fed and Bank of England monetary policy announcements later this week.

Key Movers

Demand for commodity currencies remained in the black through trade on Monday as the AUD, NZD and CAD outperformed most other major counterparts. The Euro moved off Friday’s low bouncing off 1.1545 to break back through 1.16, while the GBP, JPY and USD all drifted lower. Price action and moves were largely well contained, and it appears markets are simply adjusting positions leading into a slew of central bank policy updates. Outside the RBA policy update today our attentions turn to the Bank of England and US Federal Reserve. The Bank of England’s MPC is slated to raise interest rates in a bid to control domestic inflationary pressures. With the domestic economic recovery so fragile there is real concern the move may disrupt the reclamation of robust economic growth and instead derail growth prospects. We are keenly attuned to the commentary surrounding the decision in a bid to understand future policy and longer run impacts of a broader monetary policy tightening. The Federal reserve is widely tipped to announce the beginnings of QE tapering. With domestic macroeconomic indicators softening through Q2 and Q3 thanks to the prolific spread of the Delta variant there is scope to suggest the Fed may adopt a more cautious monetary policy normalisation. A slower path to normality should help fuel demand across risk assets and underpin recent USD weakness.

Expected Ranges

  • NZD/USD: 0.7130 - 0.7220 ▲
  • NZD/EUR: 0.6130 - 0.6230 ▼
  • GBP/NZD: 1.8890 - 1.9120 ▼
  • NZD/AUD: 0.9490 - 0.9620 ▲
  • NZD/CAD: 0.8840 - 0.8950 ▲