NZD extends downturn, underperforming against key counterparts
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Daily Currency Update
The NZD tracked lower through trade on Monday, giving up more ground to the USD and other key majors in what is now a weeklong correction. In the absence of headline domestic data, attention turned offshore. While US macro indicators softened, US treasury yields rose, bolstering demand for the USD. Ongoing yen and yuan weakness weighed on other regional currencies and sapped demand for the NZD.Having given up US$0.61 last week, the NZD tested a break below US$0.0.6070 and is now in line to test the Friday low and break below US$0.6050. Our attention turns to the RBA minutes, ECB commentary and US labour market data for direction leading into this week's major docket item, US non-farm payrolls on Friday.
Key Movers
The US dollar firmed through trade on Monday, buoyed by an extended uptick in US treasury yields, while the euro outperformed amid diluted fears surrounding the French Election. USD strength was driven primarily by ongoing Japanese yen weakness, breaking above 161 to mark fresh multi-year highs at 161.41.Ongoing strength across treasury yields continues to plague the yen as the Bank of Japan refuses to be drawn on adjusting yield curve controls and monetary policy conditions. The market seems intent on testing official's resolve and willingness to intervene and protect the yen.
The euro advanced back toward 1.0750, marking highs at 1.0741, after round one of the French Election. While disastrous for Macron, it is now unlikely that Marine Le Penn’s far-right National Rally party will garner enough votes to win an outright majority.
A reduction in the risk premia coupled with commentary from ECB officials, wherein they suggested there is not yet enough evidence to suggest the fight against inflation has been won. European yields rallied, while rate expectations tempered as markets price in one more ECB rate cut into year-end.
Our attention turns now to the RBA minutes, more ECB commentary, European CPI data and US labour market data for Direction through trade on Tuesday.
Expected Ranges
- NZD/USD: 0.6020 - 0.6120 ▼
- NZD/EUR: 0.5600 - 0.5700 ▼
- GBP/NZD: 2.0700 - 2.0900 ▲
- NZD/AUD: 0.9080 - 0.9150 ▼
- NZD/CAD: 0.8300 - 0.8400 ▲