- NZD/USD is a little higher amid low volumes and after failing to break above 0.7250.
- The kiwi has for the most part shrugged off concerns regarding a new snap lockdown in New Zealand.
NZD/USD has flatlined in recent trade, following a few hours of very low trading volumes amid a lack of US participants in the market on Monday, given Presidents’ Day holiday. Volumes should pick up a little now that New Zealand equity markets have opened and as more Asia flow comes in, but Chinese market participants are still away for Lunar New Year celebrations, so volumes will still be lower than usual.
Amid the lack of conviction in broader FX market trade on Monday (aside from in GBP, which saw solid gains of vaccine/re-opening optimism), NZD/USD was unable to break above a key level of resistance in the form of the 26 January, 9, 11 and 15 of February highs around the 0.7250 area. NZD/USD gains topped out at 0.72492 and the pair has since dropped back into the 0.7220s, where it still trades with very modest 0.1% or 10 pip gains on the day.
Driving the day
A three-snap lockdown was ordered in New Zealand over the weekend following the discovery of three new local cases of Covid-19. Somewhat concerningly, the three new uncovered cases are all reportedly of the slightly deadlier and more transmissible UK variant of the virus. Residents in Auckland will be ordered to stay at home for the duration of the lockdown and entry in and out of the city will be restricted, an approach that is in line with PM Jacinda Ardern’s typical approach to go “hard and early” when tackling any outbreak of the virus. NZD did not seem to be particularly impacted by this latest lockdown news, which, given its short duration, ought not have too much of a negative economic impact. Eyes will of course remain on whether more locally transmitted cases are uncovered over the coming days, however, amid the risk this little outbreak to turn into something worse.
NZD instead conformed more to the market’s broader appetite for risk and to US dollar flows. On the former; global equities and crude oil markets advanced on Monday amid optimism about falling Covid-19 cases in the US and as the UK hit a key vaccine milestone (15M people jabbed and the four of the most vulnerable categories all offered a vaccine). The very same optimism that helped risk assets higher hurt demand for the likes of JPY (which was the worst G10 performer on the day) and USD (the second-worst performer on the day), hence why NZD advanced.
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