NZD buoyed by uptick across key commodities and easing geopolitical tensions

Daily Currency Update

The New Zealand dollar showed modest upside through trade on Tuesday, extending comfortably back above 0.66 US cents. Fears Russia and Ukraine will be thrust into war have subsided in recent days as Russia pulled troops back from attack positions and President Putin reiterated his wish to resolve this latest dispute through “negotiations and peaceful means”. Easing tensions helped drive demand for risk assets, propping up equities and helping push the NZD higher. The NZD enjoyed added support in a robust Global Dairy Trade auction. Dairy prices rose 4.2%, pushing year to date gains toward 14% and price ranges toward record highs. While the NZD has been largely divorced from commodity price gains, they have helped add a floor beneath the currency. With global inflation expectations expected to test the current elevated levels, this should ensure the NZD finds support on moves below 0.6550 and approaching 0.6530.

Our attentions turn now to a stacked economic calendar with inflation data points due for China, UK and Canada with key US retails sales data dominating the direction. We anticipate inflation levels in the UK and Canada will remain near historical highs, while US retails sales should show a bounce back from a softer than anticipated December print.