NZD eyes break above US$0.65 following the Fed policy update
Thursday 2 February, 2023
Daily Currency UpdateThe New Zealand dollar opens back near US$0.65 this morning following the Federal Reserves all-important policy update. As anticipated the FOMC opted to raise rates by just 25 basis points, tempering the size of rate adjustments down from 50 basis points as it attempts to cushion a downturn in economic activity. Having tracked toward intraday lows at US$0.6420 leading into the policy announcement the NZD lurched upward pushing through US$0.65. Markets largely disregarded commentary from Fed Chair Jerome Powell despite its distinctly hawkish lilt. Powell reiterated the Fed’s commitment to pursuing a path of sustained downward inflation and promised several more rate hikes with an extension in monetary policy tightening likely necessary. Investors instead shifted focus toward diminishing hopes the Fed will be able to prevent a steep economic downturn. Softening US data sets suggests the US economy is losing steam and markets appear content now in riding out the promise of future rate hikes, instead looking to a reversal in Fed policy as it tries to bolster activity. The NZD continues to meet resistance on moves approaching US$0.65 and we will need to see a consolidated break above this threshold if we are to enjoy an extended push back toward US$0.66/67.
Key MoversThere is ample to digest this morning as markets respond to the Federal Reserve’s latest rate update and policy announcement. As anticipated policy makers elected to lift rates by 25 basis points a correction in size, down from the 50-point adjustment issued last time round. The decision appears a clear signal the Fed is convinced inflation has peaked and is now turning its attention to cushioning the economic downturn. In this light markets largely disregarded Fed Chair Jerome Powell’s hawkish post update statement. Powell affirmed the FOMC’s commitment to lower inflation promising additional rate hikes. While this sent some shockwaves through equity markets it appears investors concerns now lie in the Fed’s ability to softening any move toward recession. With markets looking beyond the 2023 monetary policy path the USD gave up ground across most major counterparts. The Euro has extended toward 1.10 while the GBP looks to consolidate a break above 1.23 and the Yen has forced the dollar back below 129. Our attentions turn now to the ECB and Bank of England policy statements and US non-farm payroll data for direction into the weekly close.
- NZD/USD: 0.6420 - 0.6520 ▲
- NZD/EUR: 0.5780 - 0.5950 ▼
- GBP/NZD: 1.8920 - 1.9220 ▼
- NZD/AUD: 0.9050 - 0.9130 ▼
- NZD/CAD: 0.8550 - 0.8720 ▲