Kiwi range bound ahead of RBNZ policy announcement
Wednesday 6 October, 2021
Daily Currency Update
NZD - New Zealand Dollar
The New Zealand dollar tracked sideways for much of the day on Tuesday, bouncing between 0.6930 and 0.6975. With little of note on the domestic ticket, investors appear content in managing positions ahead of today's RBNZ policy update. The domestics rate market was largely contained, with a small uplift in long run yields and OIS pricing. Analysts have priced in an 86% probability the RBNZ will raise rates later today by 25 basis points, while suggesting rates need to continue rising toward a neutral policy setting. We will be keeping a keen focus on any forward guidance around further hikes and the possible impact of further lockdown on the economic outlook. An uptick in case numbers over the last week will mean extensions in the current level 3 restrictions, a handbrake on the overheated economy. It will be critical for long run NZD performance to understand just how and if the RBNZ policy expectations have shifted as a result.
Key MoversThe US dollar maintained the weeks’ softer theme through trade on Tuesday, edging lower amid a broader safe haven sell off. The USD, CHF and JPY all gave up ground against most major counterparts. In the absence of major headline news and data sets, markets appeared content in tracking commodity prices higher and recovering yesterdays risk off spat that drove a sell off across equity markets.
The GBP managed to outperform most, pushing back through 1.36 and toward 1.3650, despite growing energy crisis concerns, labour shortages and supply side constraints threatening to derail the economic recovery.
The EUR tested a break below 1.16 and was the day's big loser. Rising breakeven inflation rates, concerns surrounding a looming energy crisis and a widening in real German-US yield spread have all coupled together to dampen demand for the single unit. With the gap in monetary policy expected to widen and real near term challenges threatening the broader economic recovery, we expect further downward pressure on the EUR through the end of the year.
- NZD/USD: 0.6880 - 0.7040 ▲
- NZD/EUR: 0.5950 - 0.6040 ▲
- GBP/NZD: 1.9420 - 1.9680 ▲
- NZD/AUD: 0.9480 - 0.9630 ▲
- NZD/CAD: 0.8710 - 0.8790 ▼