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NZD worst performer amid backdrop of bond market uncertainty

NZD - New Zealand Dollar

The New Zealand dollar underperformed through trade on Wednesday closing the day as the worst performer among major currencies amid a backdrop of risk aversion and bond market uncertainty. Attentions again returned to bond rates with prices rising steeply overnight, led by gains across UK, US and German bonds. With rates advancing, markets adopted a more cautious tone prompting a risk-off mood to permeate equity markets and leak into currencies. The S&P 500 and NASDAQ suffered modest declines while the NZD gave up 0.73 to touch intraday lows at 0.7240.

With little of note on today’s domestic docket, attentions remain with the broader narrative in determining direction. Having comprehensively rejected last week's push above 0.74, the NZD will likely remain range bound between 0.7180 and 0.7320 through the short term. Until there is a correction in bond market volatility, gains will be measured.

Key Movers

The US dollar found support through trade on Wednesday as bond market gains drove uncertainty across financial markets and prompted a shift to haven assets. Advancing against most counterparts the dollar largely shrugged off a softer than anticipated labour market preview and service index performance. Inflation pressures continue to mount in the US with the Price Paid Index surging to a 12-year high, driving gains across other inflation indicators. With budget and fiscal spending expected to inflate price pressures further, bond markets rose almost 10 basis points across 10-year notes. The euro gave up 1.21 to slip below 1.2050 while the pound failed to extend back beyond 1.40 tracking sideways and bouncing between 1.3920 and 1.4000.

With little of note on today’s macroeconomic docket, attentions remain with bond market price action as a marker for risk aversion ahead of tomorrow's US non-farm payroll print.

Expected Ranges

NZD/USD: 0.7180 - 0.7320 ▼

NZD/EUR: 0.5980 - 0.6050 ▼

GBP/NZD: 1.8980 - 1.9320 ▲

NZD/AUD: 0.9270 - 0.9360 ▼

NZD/CAD: 0.9020 - 0.9250 ▼