The New Zealand dollar has extended its losses at the start of the week. NZD/USD is currently trading at 0.6970, down 0.40% on the day.
Risk-off hurts weighing on kiwi
The deterioration in risk sentiment sent the New dollar sharply lower on Friday, as the currency fell 0.68% and ended the week just below the 70 level, at 0.6999. There are trouble spots across the globe which are making investors nervous. In Europe, Covid has resurged in a fourth wave, which will likely lead to lockdowns. In China, the central bank has taken measures to limit speculation in the yuan and stem its appreciation. Finally, the Russian military build-up on the border with Ukraine could lead to a military escalation. These hotspots have resulted in a risk-off environment which is weighing on minor currencies like the New Zealand dollar.
New Zealand will release retail sales later on Monday. In the second quarter, retail sales posted a strong gain of 3.3%. Another solid gain for Q3 would give the New Zealand dollar some badly needed support. Wednesday will feature this week’s highlight, the RBNZ policy decision. The central bank is widely expected to raise rates for a second straight month, but it’s anybody’s bet whether the bank will hike by 50 bps or go for a ‘hawkishly dovish’ raise of 25 bps. The uncertainty could result in some significant volatility for the New Zealand dollar this week.
In the US, President Joe Biden gave the nod to Jerome Powell, who will head the Federal Reserve for another four years. Lael Brainard, who was also in the running, becomes Fed vice-chair. Investors should be pleased with the decision, as it keeps consistency at the Fed at a delicate time, with inflation at a 30-year high and the economy still grappling with the Covid pandemic. Powell is considered slightly more hawkish than Brainard, and he could well opt to accelerate the tapering scheme due to inflation pressures.
- There is resistance at 0.7059 and 0.7120
- 0.6958 is under strong pressure in support. Below, there is support at 0.6818
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