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NZD outperforms major counterparts as restrictions continue to ease

Tuesday 9 November, 2021

Daily Currency Update

NZD - New Zealand Dollar

The New Zealand dollar outperformed major counterparts Monday up almost three quarters of a percent on last weeks close thanks to a positive shift in the underlying risk narrative. With little of note on the macroeconomic ticket investors seem driven by an improvement across broader risk flows. Last weeks dovish central bank shift has helped elevate equities and ensure the recent risk on run is sustained, spilling over into currency markets. Commodity currencies were the primary beneficiaries on Monday with the NZD added an additional boost on news COVID restrictions across Auckland will be eased on Wednesday as the country tries to transition away from a COVID zero policy and ramp up vaccination rates. Having opened at 0.7105 the NZD marked intraday highs at 0.7170 and extended back above 0.9650 against the AUD, tested 0.62 Euro and briefly edged above 0.53 against the Pound. The NZD remains vulnerable to broader fluctuations in the risk narrative and the ongoing impact Of Covid restrictions. NZD remains some 6-9 months behind the rest of the world in its plan to live with the COVID virus and the domestic economies ability to respond to the ongoing impacts of the pandemic will cast a pall over the economy through the months ahead.

Key Movers

A positive risk tone drove the USD, CHF and JPY lower through trade on Monday. With last weeks risk events now behind us and the RBA, ECB, BoE and Federal Reserve all refusing to drawn on bringing forward guidance for interest rates investors looked to chase risk assets higher. Equities trended higher and US treasuries gave up Friday’s rally as the positive risk on shift spilled into currency markets. Outside an NZD surge the GBP is one of the days standout performers despite a slew of negative headlines. Yields on UK gilts fell to a record low while reports the UK may look to invoke article 16 of the Northern Ireland Protocol. The Article introduced as part of Brexit negotiations was designed to act as safeguard if either side identifies a negative economic, societal or environmental impact as a result of new trade rules. The UK is pushing to change 5 key sticking points within the Northern Ireland protocol and threatening to invoke article 16 could well blow up in their face and further damage the already fragile domestic economic recovery. Our attentions turn now to commentary from Bank of England Governor Bailey and Fed chair Jerome Powell, while US PPI data headlines the macroeconomic ticket.

Expected Ranges

  • NZD/USD: 0.7090 - 0.7220 ▲
  • NZD/EUR: 0.6130 - 0.6230 ▲
  • GBP/NZD: 1.8780 - 1.9020 ▼
  • NZD/AUD: 0.9580 - 0.9690 ▲
  • NZD/CAD: 0.8850 - 0.8990 ▲