NZD works to consolidate break above US$0.60 amid renewed risk appetite

Daily Currency Update

The New Zealand dollar advanced through trade on Monday, extending gains won in the wake of last week's softer-than-expected US payroll and service prints and consolidating a break above US$0.60. With hopes the Fed will cut rates through the back half of 2024 rekindled, the NZD extended its break above US$0.60, advancing to mark intraday highs just short of US$0.6040, before shifting lower and trading sideways around US$0.6010.

The NZD has been well supported since last week's FOMC policy update wherein the Fed maintained its easing bias, taking some of the heat out of the treasury market and putting downward pressure on US yields. With the labour market softening and services data pointing to a slowdown in economic activity expectations the Fed may need to raise rates again have faltered and markets are again looking toward a rate cut before the year is out. With pressure on the USD mounting, there is room for the NZD to extend on gains in the near term.

Attention today turns to the RBA policy update as the lone headline item on the macro docket. With NZD trading below AU$0.91 through last week, forward guidance and any divergence in monetary policy expectations will help shape direction between the antipodean counterparts.