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Kiwi underperforms as investors unwind post RBNZ policy meeting rally

NZD - New Zealand Dollar

The New Zealand dollar underperformed through trade on Tuesday, drifting back toward 0.7250 despite overwhelming USD softness. Having touched 0.7315 in the wake of last week’s monetary policy statement and RBNZ update, investors appear content, selling into the rally and forcing the currency comfortably below resistance and toward the middle of recent ranges. While we remain optimistic the NZD will extend toward and through 0.73, possibly by months end, near term pandemic led uncertainty, lingering inflation concerns and a slow domestic vaccine rollout, outweigh broader market optimism. With little of note on today’s domestic ticket, our attentions turn to Friday’s US non-farm payroll print as the big ticket item driving macroeconomic direction into the end of the week.

Key Movers

Price action across currency markets was largely muted on Tuesday, with the USD, EUR and JPY all flat. The GBP was the days big underperformer, giving up 1.42 and slipping below 1.4150. Despite the UK’s best efforts to vaccinate its citizenry as quickly as possible and a slow and measured economic re-opening, the introduction of the Indian variant has sparked a fresh wave of infections across some regions sparking fears the government will be forced to slow and even roll back the plan to re-open the economy. The UK has led most countries in delivering a fast and effective vaccination program and the emergence of variants raises significant near-term concerns. Our attentions, as always, remain with the evolving pandemic while commentary from Bank of England Governor Bailey headlines the macroeconomic ticket.

Expected Ranges

NZD/USD: 0.7180 - 0.7315 ▲

NZD/EUR: 0.5890 - 0.5990 ▲

GBP/NZD: 1.9320 - 1.9620 ▼

NZD/AUD: 0.9290 - 0.9405 ▼

NZD/CAD: 0.8710 - 0.8790 ▼