Daily Currency Update

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Modest depreciation for the Kiwi sees it underperform against major counterparts

NZD - New Zealand Dollar

The New Zealand dollar was the weakest of major currencies overnight, giving up 0.7250 to mark overnight lows at 0.7215. Losses were modest but enough to force the NZD lower against most counterparts in what was a largely lacklustre session across currency markets. Investors looked to consolidate positions following 6 consecutive days of risk on gains. Concerns of a rise in inflationary pressures could derail the recovery, prompting the RBNZ to tighten financial conditions ahead of scheduled perhaps lead to the NZD correction.

With little of note on today’s domestic ticket our attentions turn to commentary from Fed-chair Jerome Powell this evening. We expect Powell will maintain the banks current accommodative stance, however any commentary surrounding recent inflation concerns within the US and the subsequent FOMC response could spark price action across currency markets.

Key Movers

The US dollar weakened through trade on Tuesday, extending Monday’s losses across the majority of counterparts, except for the NZD. Reports Mario Draghi is on the precipice of forming a collation government and becoming the new Italian Premier helped lower Italian bond yields and drive euro gain. Draghi is tipped to be the saviour of the Italian economy and expected to save the country from economic ruin. He has already signalled the need to prioritise a common EU budget, sagely direct Italy’s share of the EU recovery fund and increase focus on fiscal reform. Having pushed through 1.21 overnight the euro has well and truly bounced off last week's dip below 1.20. That said we still see single currency softening through the back half of the year as the Eurozone recovery lags that of major counterparts.

With little of note on today’s domestic docket our attentions turn to commentary from Fed-chair Jerome Powell. With the Fed President expected to offer little beyond the current narrative price action across currency markets will likely remain muted.

Expected Ranges

NZD/USD: 0.7080 - 0.7260 ▼

NZD/EUR: 0.5950 - 0.6010 ▼

GBP/NZD: 1.8980 - 1.9220 ▲

NZD/AUD: 0.9330 - 0.9420 ▼

NZD/CAD: 0.9150 - 0.9230 ▼