Home Daily Commentaries NZD closes in on break above 0.65 amid positive shift in sentiment

NZD closes in on break above 0.65 amid positive shift in sentiment

Daily Currency Update

The New Zealand dollar extended its recovery above 0.64 US cents amid a positive shift in risk sentiment through trade on Monday. Key equity indices rallied with the S&P 500 up 2% on the day while a mix of positive and negative newsflow from China appeared to favour buyers, pushing the NZD toward intraday highs just shy of 0.65 US cents. Reports Beijing recorded 99 new Covid infections elevated fears the capital would follow Shanghai into an extended lockdown did little to dampen demand for risk assets as intelligence suggesting President Biden would consider lifting import tariffs in a bid to ease inflationary pressures help propel the CNY higher, a welcome relief for the NZD. Having touched pushed above 0.6450 toward the end of the domestic session the NZD maintained support overnight advancing to touch highs at 0.6490.

Our attentions turn now to Q1 retail sales data as a marker for domestic economic performance while global inflationary pressures, growth concerns and risk sentiment continue to dominate direction ahead of tomorrow’s RBNZ and MPS policy update. We expect a 50-basis point hike.

Key Movers

Safe Haven Currencies underperformed through trade on Monday amid a shift in risk sentiment. Key equity indices climbed higher as the USD, JPY and CHF all shifted lower. The USD extended last weeks downward correction with the DXY USD index down 1% on the day. Last week, concerns surrounding the US growth outlook forced investors to review expectations for Fed policy while this weeks positive shift in risk sentiment drove investors away from haven assets. The Euro surged through 1.06 and 1.0650 falling short of a break above 1.07 while the GBP eyed a break above 1.26. Having witnessed a number of false starts we are keenly attuned to any further USD downside as a key marker of a broader shift in sentiment. Markets have been long USD for some time and a correction to the mean is probably warranted. Our attentions today turn to a slew of PMI data points across the US, UK and Europe.

Expected Ranges

  • NZD/USD: 0.6380 - 0.6520 ▲
  • NZD/EUR: 0.6010 - 0.6120 ▼
  • GBP/NZD: 1.9280 - 1.9580 ▼
  • NZD/AUD: 0.9050 - 0.9150 ▲
  • NZD/CAD: 0.8220 - 0.8320 ▲