- NZD/USD traded lower on Wednesday, with the kiwi and other risk-sensitive currencies including AUD, CAD and GBP suffering.
- The pair has dropped from Asia Pacific session highs in the 0.7060s to just above the key 0.7000 level.
NZD/USD traded on the back foot for most of Wednesday’s session, with the kiwi and other risk-sensitive currencies including AUD, CAD and GBP suffering despite a lack of any definitive risk-off bias in other asset classes (stock, bond and commodity markets were subdued, at least). The pair has now dropped back from Wednesday Asia Pacific session highs in the 0.7060s to trade just above the key 0.7000 level, having broken below Tuesday’s 0.7008 low. Short-term NZD/USD bears may now target a move back to support in the form of the late-March/early-April lows in the 0.6940s.
Driving the day
The minutes from the 16-17 March FOMC meeting were released on Wednesday and there was emphasis on Fed official’s focus on making actual progress towards their inflation and employment goals when determining policy. In other words, the Fed continues to dovishly signal that it will wait until after the economy heats up to cool it down rather than acting pre-emptively, as has been the case in the past (and the Fed thinks has hurt the economy, particularly following the Global Financial Crisis in the early 2010s).
The minutes did not contain much unexpected or new information, thus markets did not really see much of a reaction. The same can be said for the latest batch of remarks from US President Joe Biden with regards to his infrastructure spending proposal; no new information and thus not much for markets to trade-off of. Various Fed speakers were also on the wires; influential Fed member Lael Brainard had good things to say about the prospects for economic recovery in the US and Robert Kaplan largely stuck to the usual script.
Elsewhere, on the data front, US trade numbers in the month of February saw the country post another record trade deficit of above $70B for the first time. Meanwhile, in terms of the latest on the pandemic, concerns persist regarding the spread of the virus in India, Brazil, Japan, South Korea and Europe, while UK and EU medical agencies just released updated guidance for the AstraZeneca vaccine, with the former stating that the jab is linked to rare blood clots, though the benefits of taking the vaccine still outweigh the risks.
Looking ahead, “amid the recent softening in the USD, jump in commodity prices and opening of the trans-Tasman bubble”, ANZ says that they “would have expected NZD outperformance, but that hasn’t happened”¦ That being the case, the case for a rebound seems to trump the case for further weakness”. The next major economic event out of New Zealand is the release of the preliminary April ANZ Business Confidence and Activity Outlook indices at 02:00BST during Thursday’s Asia Pacific session. Meanwhile, Fed Chair Jerome Powell will also be speaking at an IMF panel, giving NZD/USD plenty to think about over the coming 24 hours.
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