NZD overwhelmed by extended risk off mood
Thursday 27 April, 2023
Daily Currency UpdateThe New Zealand dollar underperformed through trade on Wednesday, overwhelmed by a broader risk-off move and softer than anticipated Australian inflation data. Having tracked within a narrow 10-point range through the morning, the NZD drifted lower through the afternoon after Australian CPI data printed softer than the market anticipated. Australian inflation pressures eased through Q1 all but eliminating the chance of an RBA rate hike next month. With the AUD giving up ground against most major counterparts, the NZD fell in solidarity with its Antipodean neighbour. Having given up US$.6145, the NZD tracked toward intraday lows south of US$0.6115 overnight as an extension in the week's risk-off mood weighed on equities and risk assets. Despite a modestly weaker USD, the NZD remained under pressure through the overnight session and opens this morning at the bottom of recent ranges buying US$0.6116, at time of writing.
Our attentions turn now to the ANZ business outlook survey. We anticipate it will affirm the narrative of weak activity and sustained deflationary pressures.
Key MoversDespite an extension in the risk-off narrative, the USD is notably weaker this morning when measured against a basket of major counterparts. US First Republic Bank remains in the headlines with its stock price tumbling another 20% as markets continue to flee following weaker-than-anticipated Q1 earnings data. While most investors had moved on from the banking crisis that engulfed markets in March, the ultimate demise of First Republic Bank serves as a timely reminder that conditions within the US banking sector remain fragile. Equities attempted to stage a recovery but ultimately failed closing lower on the day while US treasuries rose. With the USD underperforming the EUR and GBP made up ground with the Euro falling just short of a break above 1.11, marking 12-month highs at 1.1095 before profit-taking prompted a correction back below 1.1050. Sterling followed a similar trajectory punching above 1.25 before correcting lower to trade nearer 1.2470 on open this morning. With the CAD weaker following softer oil prices and the JPY bolstered by the risk-off mood, our attentions turn to key US employment data and GDP estimates for direction through Thursday.
- NZD/USD: 0.6080 - 0.6220 ▼
- NZD/EUR: 0.5480 - 0.5620 ▼
- GBP/NZD: 1.9980 - 2.0520 ▲
- NZD/AUD: 0.9230 - 0.9320 ▲
- NZD/CAD: 0.8280 - 0.8380 ▼