NZD turns lower as markets seek haven assets
Wednesday 27 July, 2022
Daily Currency UpdateThe New Zealand dollar was among the worst performers through trade on Tuesday, giving up 60 points as markets looked to divest of risk assets and chase safe haven holdings. Having tested 0.6280 through the domestic session the NZD fell steadily overnight giving up 0.6250 before finding support near 0.6220. Softer than anticipated US consumer confidence, poor earning’s data across a number of key US retailers and a downgrade in IMF global growth forecasts prompted a correction across equities and downturn in commodity currencies. NZD weakness extended beyond the USD, turning below 0.90 against the AUD while giving up ground to the CAD and GBP. Our attentions turn now to the FOMC monetary policy update. With most analyst pricing in a 75-basis point hike our focus is affixed to commentary from Fed Chari Jerome Powell. We anticipate Powell and policy makers will stay on message and maintain an aggressive program of interest rate adjustments. However, rising concerns the US is trending toward recession may prompt a change in language and a shift to a more measured approach from September.
Key MoversThe USD, CHF and JPY all outperformed through trade on Tuesday as a risk off mood engulfed investors. The USD found favour while the Euro gave up 120 point plunging back through 1.02 and 1.0150. European natural gas prices continue to rise, jumping 15% Tuesday, marking a 25% increase this week alone. Reports Gasprom will cut supply through its Nordstream 1 pipeline to just 20% of capacity have forced EU countries to introduce rationing measures in a bit to maintain supply through the upcoming winter. Having broken above 200 Euro per mega watt hour Gas prices are now at their highest level since mid-March amplifying pressures on the EU and pushing to toward the brink of economic disaster. Having staved off a break below Parity investors are still pricing a significant downturn in Euro fortunes moving through the 2nd half of the year as headwinds continue to strengthen. Our focus today turns to the Fed policy update and Forward guidance ahead of the September meeting.
- NZD/USD: 0.6130 - 0.6320 ▼
- NZD/EUR: 0.6080 - 0.6220 ▲
- GBP/NZD: 1.9180 - 1.9420 ▲
- NZD/AUD: 0.8950 - 0.9050 ▼
- NZD/CAD: 0.7980 - 0.8080 ▼