French Election concern sparks flight to safety and weighs on NZD
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Daily Currency Update
The New Zealand dollar drifted lower through trade on Thursday amid an overwhelming upswing in risk aversion. Elevated uncertainty surrounding the French election and a sharp sell off in European equities forced investors toward haven assets, benefiting the USD, CHF and JPY and forcing the NZD back toward US$0.6150. The NZD did enjoy a short-term boost on the heels of softer US PPI data and a correction in Fed rate expectations, pitching upward to mark intraday highs above US$0.62, before risk aversion took off and the NZD shifted to intraday lows at US$0.6160, before finding support.Risk sentiment will be key in determining direction leading into the weekend and while our attentions remain affixed to the French election and European equity performance REINZ housing data, manufacturing PMI’s and Q2 CPI estimates dominate the local ticket. Offshore commentary from ECB officials, Eurozone CPI numbers and US consumer sentiment round out a crowded macro docket.
Key Movers
The US dollar has advanced against all G10 currencies amid a definitive risk off shift, driven by French political concern and a European equity sell off. Despite softer US PPI data and a 3rd consecutive daily decline in US treasury yields, the USD benefited from a sharp correction in French and German government bond yields. Reports indicate Marine Le Pen’s far right party could bring in looser fiscal policies if it wins the election, while Moody’s has warned France's credit score could come under scrutiny in coming weeks, as the snap election focuses market attentions on France’s widening fiscal deficit and rising debt metrics. European equities turned lower and investors looked for safety in the USD and CHF. The DXY index surged back above 105 as the euro slumped back below 1.0750 and sterling drifted back below 1.2750.While underlying fundamentals support a USD correction, the dollar should maintain support amid elevated risk aversion. Our attentions remain affixed to the French election and European equity performance, while commentary from ECB officials, Eurozone CPI numbers and US consumer sentiment dominate a crowded macro ticket.
Expected Ranges
- NZD/USD: 0.6100 - 0.6220 ▼
- NZD/EUR: 0.5700 - 0.5800 ▲
- GBP/NZD: 2.0600 - 2.0800 ▲
- NZD/AUD: 0.9250 - 0.9320 ▲
- NZD/CAD: 0.8420 - 0.8520 ▼