Home » Daily Commentaries » NZD volatility carries the day as market nervous about Omicron

NZD volatility carries the day as market nervous about Omicron

Thursday 2 December, 2021

Daily Currency Update

Risk sentiment improved through trade on Wednesday, turning positive in the latter half of the domestic session allowing the NZD to extend back through 0.6850 and mark intraday highs above 0.6865. Anecdotal evidence continues to emerge from around the world, suggesting the Omicron strain of the COVID-19 variant may not be as virulent and transmissible as first feared, while the current crop of vaccines will still afford protection against severe disease. That said, uncertainty remains elevated and volatility measures continue to test 6-month highs as investors attempt to position themselves against the possible impacts of a new COVID-19 variant. It will be some weeks before any real scientific evidence is available and until then we continue to operate within a vacuum. Having held above 0.68 US cents we continue to watch supports at 0.6770 and 0.67 as the global health outlook, further correction in short end US yields and rising global rates continue to govern near-term direction.

Key Movers

Volatility and the ebb and flow of market sentiment continue to steer near-term direction with commodity currencies enjoying early gains through trade on Wednesday before haven currencies regained the ascendency overnight. The US dollar clawed back against the euro forcing the common currency back toward 1.13 while the pound gave up 1.33 extending toward intraday lows at 1.3260. The yen however was the day's big winner, extending its recent risk-off rally, pushing the USD back below 113. The yen remains a key barometer of broader risk sentiment enjoying extended gains against risk correlated currencies the AUD and NZD. Further fluctuations across these crosses will help provide insight into the current status of the broader risk narrative. Our attentions today turn to US jobless claims, ahead of tomorrow’s Non-farm payroll print. Wednesday’s ADP private payroll data came in as expected and suggest labour market growth remains strong enough to support a faster pace of QE tapering. A surprise fall in labour market growth could derail the recent hawkish sentiment surrounding the Fed and its policy outlook.

Expected Ranges

  • NZD/USD: 0.6770 - 0.6870 ▼
  • NZD/EUR: 0.5980 - 0.6055 ▼
  • GBP/NZD: 1.9350 - 1.9620 ▼
  • NZD/AUD: 0.9550 - 0.9620 ▲
  • NZD/CAD: 0.8690 - 0.8750 ▲