Home » Daily Commentaries » NZD the days worst performer as risk sentiment sours

NZD the days worst performer as risk sentiment sours

Tuesday 21 December, 2021

Daily Currency Update

The New Zealand dollar plumbed new lows through trade on Monday, slipping below supports at 0.6720/30 to again test 0.67 US cents. Markets refused to relinquish Friday’s risk off mandate prompting an extended push toward haven assets and away from the NZD, AUD and CAD. The NZD was the day’s worst performer as markets remain focused on the rapid spread of the omicron variant and the imposition of new public health orders across Europe. With little of note on today’s macroeconomic ticket direction will again be driven by fluctuations in the risk bias, led by the Omicron narrative. With case numbers growing exponentially we expect officials will have no choice but to levy restrictions, crimping growth and production through Q1 next year, weighing on risk demand and the NZD. With resistance on moves approaching 0.67 intact for now, there is scope, with sustained USD upside the NZD could test 0.66 and potentially 0.65 as a worst-case scenario. However, as booster shots are given and natural immunity rises there is room to suggest a rebound is on the table as we move into Q2 and Q3 2022.

Key Movers

Haven currencies were the days big winners as Risk sentiment continues to sour in the face of a rapidly spreading omicron strain. The USD, JPY and CHF were among the days best performers as the NZD, AUD and CAD all struggled amid a correction in commodity prices and risk assets. Oil prices plunged almost 5% amid fears new travel restrictions and lockdowns will reduce demand through the coming weeks. The CAD tumbled through 0.7750, marking fresh lows at 0.7715, while rising Gas prices across Europe and the UK forced the GBP through 1.32. As a cold snap envelops Europe, fears of power shortages have sent gas prices rocketing higher overnight, with UK prices up 8% and 55% through December thus far. With the UK poised to introduce a two week lockdown after Christmas fears new restrictions, rising inflation and surging gas prices will crimp any hope of a domestic economic recovery in Q1 continue to weigh on the GBP. Remarkably despite rising Gas prices and Covid concerns the Euro faired well on Monday, advancing back toward 1.13, with no obvious catalyst on hand to explain the uptick in demand for the single currency. With little of note on today’s ticket and liquidity evaporating in the lead in to XMAS we expect ranges will be well confined with breakouts driven by the evolving omicron narrative.

Expected Ranges

  • NZD/USD: 0.6700 - 0.6820 ▼
  • NZD/EUR: 0.5905 - 0.6020 ▼
  • GBP/NZD: 1.9620 - 1.9780 ▲
  • NZD/AUD: 0.9390 - 0.9520 ▼
  • NZD/CAD: 0.8650 - 0.8730 ▲