NZD recovery continues as improved risk sentiment forces USD lower

Daily Currency Update

The New Zealand dollar recovery continued though trade on Monday amid a sustained improvement in risk sentiment. In the absence of headline domestic data, the NZD tracked sideways for much of the local session, bouncing between 0.6090 and 0.6115 before surging toward intraday highs above 0.6150 US cents. Markets appetite for risk has risen through the last week, helping the NZD stave off a consolidated break below 0.60 US cents and mount a recovery. A fall in European gas prices, coupled with reports Ukrainian forces have forced Russian troops to retreat in the countries north-east and expectations US inflation pressures are beginning to ease have fostered renewed demand for risk assets and helped drive NZD upside.

Our attentions turn now to domestic housing data and key consumable inflation data ahead of to tonight’s all-important US CPI print. With house prices expected to show further declines and the food price index likely to show another significant jump higher the domestic outlook will offer little to sustain/extend the NZD recovery. Instead, a sustained contraction in US price pressures and broader US dollar weakening remain key in driving NZD upside.