Daily Currency Update

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NZD buoyed by Fed commitment to accommodative monetary policy

NZD - New Zealand Dollar

The New Zealand dollar shot through 0.7250 through trade on Wednesday, buoyed in the wake of the Federal Reserve’s commitment to a dovish monetary policy. Having tracked lower through much of the domestic session testing 0.7150 US cents prior to the Fed policy update, the NZD shot through 0.7200 and 0.7250 to mark intraday highs at 0.7262. Policymakers opted to maintain the current policy setting, reiterating their commitment to accommodative monetary policy. The dot plot showed the majority of policymakers expected to maintain interest rates at record lows into 2024, prompting gains across equities and risk assets. With the risk event now behind us our attentions turn to the domestic Q4 GDP print. We expect numbers to moderate following the huge rebound in Q3. The economy tracked sideways as confidence waned following a series of COVID-19 lockdowns and confidence international tourism will return in H1 faltered. Watch resistance approaching 0.7280/90 with support well and truly intact on moves approaching 0.71.

Key Movers

The dollar index tracked lower through trade on Wednesday, forced downward as the markets absorbed the Fed’s commitment to dovish monetary policy. Ten year treasury rates retraced early gains sliding off 1.685 to 1.66 while equity markets trended higher unwinding early losses and pushing into positive territory.

The Great British pound broke back through 1.3950 having tested 1.3850 ahead of the Fed policy update. Sterling has struggled to extend gains beyond 1.40 and our attentions turn now to the Bank of England policy meeting this evening. We expect little change from the wait and see approach offered in recent months. That said, the UK continues to lead the way in vaccinating its citizenry and with Brexit it behind there is some scope to suggest the BoE could adopt a more hawkish and optimistic tone.

Expected Ranges

NZD/USD: 0.7100 - 0.7290 ▲

NZD/EUR: 0.6010 - 0.6090 ▲

GBP/NZD: 1.9180 - 1.9420 ▼

NZD/AUD: 0.9240 - 0.9305 ▼

NZD/CAD: 0.8930 - 0.9020 ▲