Home Daily Commentaries New Zealand dollar buoyed by Fed’s dovish statement

New Zealand dollar buoyed by Fed’s dovish statement

Daily Currency Update

The New Zealand dollar found support overnight, following a USD correction in the wake of the Fed’s latest policy offering. Markets largely ignored domestic labour market data, as a sustained message of labour market easing was confirmed by a rise in the unemployment rate to a three-year high and a slowdown in the increase of labour costs. Recessionary conditions continue to linger, pushing NZD yields a little lower, yet having little impact on the NZD. Instead, market attentions were affixed to the Fed policy update. While analysts had priced in no change in rates, there were few surprises in the accompanying statement a surprisingly dovish tone proffered by Fed Chair Jerome Powell that sent US rates, treasuries and the dollar lower allowing the NZD to push toward session highs near US$0.5940 before settling near US$0.5920.

Our attentions now turn to the Bank of Japan's March meeting minutes and Eurozone PMIs for April as the headline items on the docket through Thursday.

Key Movers

The US dollar opened lower this morning as markets reacted to the FOMC policy meeting and comments from Fed Chair Jerome Powell. As anticipated, committee members opted to leave rates on hold and proffered few changes in the official statement to that issued last month. While policymakers acknowledged the lack of progress toward the 2% target, the introduction of new language was largely in line with recent Fed commentary and had little market impact. Cue, Fed Chair Jerome Powell’s press conference. Markets were expecting a hawkish bias given the persistence of price pressures and wage inflation yet Fed Chair, Powell offered a dovish statement suggesting the Fed was looking for reasons to cut rates and it was “unlikely the next policy move will be a hike”. US treasury yields and rates fell, dragging the USD lower. The Euro has punched back above 1.07, while sterling trades above 1.25 and the Yen is markedly stronger following further suspected intervention from the Ministry of Finance and Bank of Japan. Following Powell’s press conference, the USD fell from 157.60 to 153 before settling around 155. Interestingly and unlike Monday’s suspected intervention following the move to 160 this recent adjustment came during a period of relative stability suggesting “excessive market movements” may not be the sole catalyst for intervention. Instead, it looks like currency officials may adopt a more opportunistic approach to intervention, keeping markets on edge.

Our attentions now turn to the Bank of Japan's March meeting minutes and Eurozone PMIs for April as the headline items on the docket through Thursday.

Expected Ranges

  • NZD/USD: 0.5850 - 0.5980 ▲
  • NZD/EUR: 0.5500 - 0.5600 ▲
  • GBP/NZD: 2.1000 - 2.1300 ▼
  • NZD/AUD: 0.9050 - 0.9150 ▼
  • NZD/CAD: 0.8080 - 0.8180 ▲

Written by

Matt Richardson

OFXpert

As a Senior Corporate Client Manager, Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange. Matt has clients who he has been working with for over a decade, a testament to his knowledge and dedication in the field. Matt is also a regular contributor on Ausbiz, offering clear and precise updates on currency market trends, showcasing his ability to interpret complex financial data into actionable insights.