NZD breaks US$0.63 as Fed President suggest pace of hikes will slow

Daily Currency Update

The New Zealand Dollar has surged through US$0.63 overnight following less than hawkish commentary from Fed president Jerome Powell. With little of note on the domestic ticket the NZD drifted sideways through much of the local session bouncing between US$0.6190 and US$0.6230. Optimism surrounding the eventual move away from Covid-zero in China continues to gather momentum as officials consider authorising a fourth Covid booster, while messaging emanating from Chinese State media is beginning to pivot away from fear of the virus and toward personal responsibility. The CNY and CNH continued their recent run of strength underpinning NZD gains and helping solidify support on moves below US$0.62. Having marked session highs just short of US$0.62500 the NZD leap toward US$0.63 as markets scramble to respond to commentary from Fed Chair Jerome Powell. Where Fed officials have been at pains to suggest the pace of rate hikes won’t change Powell’s comments sparked a sharp correction across US rates and sent the USD tumbling. Powell suggested “we don’t want to overtighten” and that “slowing rate hikes at this point makes sense”. Markets rushed to adjust expectations for the December 15 policy update with near 90% pricing in a smaller pace of rate adjustment and a 50-point hike. Having touched intraday highs at US$0.6312 the NZD opens this morning at US$0.6301.