NZD Corporate FX Update
With increased conviction that the Fed tightening cycle is over, the NZD has likely moved into a higher trading range. We have a constructive outlook for 2024.
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A major turning point in the cycle?
Last week was monumental for financial markets, with large moves across equities, bonds and currency markets. Risk appetite bounced higher as the market embraced a view that the Fed hiking cycle is over. This had an outsized impact on the NZD, with a more than 3% gain for the week to 0.60, despite lower NZ-global rate spreads after softer than expected NZ labour market reports saw the market step towards a view that the NZ tightening cycle might also be over.
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NZD Corporate FX Update
The NZD has been in a consolidation phase near its lows for the year, stuck in a range of about 0.5860-0.6050 since early August. Over the short-term we continue to see two-sided risks. Israel’s “war” against Hamas is a new risk event to consider. The market has taken a sanguine view, on the assumption that Iran remains out of the conflict, minimising the disruption to oil markets and wider market turmoil. Being a risk-sensitive currency, a marked escalation would be NZD-negative.
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