NZD/USD consolidates just below 0.7100 ahead of crunch US fiscal stimulus talks

• NZD/USD is consolidating just beneath the 0.7100 level ahead of Q3 Current Account numbers.
• NZD has benefitted from a broad risk-on wave on the back of stimulus hopes that undermined demand for USD.

NZD/USD has put in a solid performance thus far this Tuesday, and currently trades just to the south of the 0.7100 level. At present, the pair is trading with gains of around 20 pips or just under 0.3% on the day.

NZD boosted in tandem with other risk assets

Its been a risk-on day, with gains in the likes of US equities (the S&P 500 is trading over 1% higher) and crude oil markets (WTI is also trading over 1% higher) being driven by hopes that the US lawmakers can agree a deal on further Covid-19 in crunch talks which are slated to begin at 21:00GMT.

US Speaker of the House Nancy Pelosi (leader of the Democrat’s majority in the House) will be speaking with Republican Senate Majority Leader Mitch McConnell and the House and Senate Minority Leaders Chuck Schumer and Kevin McCarthy. Ahead of the meeting, US Senate Majority Leader Mitch McConnell said “we’re not leaving here without a Covid-19 package. It’s not going to happen… no matter how long it takes, we’ll be here”. Market commentators have been slated as saying that this time it really feels as though the will to get a deal is there, but this would not mark the first time that markets have got their hopes up about a deal only to then be disappointed.

But for the time being, FX markets are enjoying the risk on wave; USD is broadly lower, with the Dollar Index (DXY) back below 90.50, hence why NZD/USD has been boosted back towards 0.7100.

NZD traders do seem a little tentative to test the 0.7100 level, however, perhaps amid some caution ahead of New Zealand Q3 Current Account data out at 21:45GMT. Markets expect Current Account data to show the economy borrowing NZ$ 3.65B more than it lent out to fund domestic consumption in the third quarter of the year. However, US fiscal stimulus updates are likely to remain in the driving seat for the pair.