NZD/USD back below 0.6100 on reduced risk appetite

• NZD/USD moves on reduced global risk appetite.
• The Fed minutes will shed light on the FOMC deliberations.

NZD/USD is under pressure at the start of this week as a stronger US dollar recovers from a series of red days following a period of accumulation in the depths of the November sell-off. As of this writing, the DXY, an index that measures the US dollar against a basket of currencies, is up 0.77%, sending the kiwi down to a low of 0.6087 from a daily high of 0.6169.

The catalyst for this move can be partly attributed to a risk-off start to the week due to further COVID-19 cuts in China, which have fueled concerns about the global economic outlook.

The kiwi fell overnight amid a broad reduction in risk appetite globally as equities fell and the dollar regained some of its safe-haven appeal,” ANZ Bank analysts said. There did not appear to be much behind it. with little data or news to digest, but we suspect there could be a bit of volatility over the next few days, with the RBNZ MPS due out tomorrow, followed by a handful of global PMI data, and then the Minutes. from the Fed”.

The MPS could be the true wild card even if the market gets the 75 basis point rally analysts are hoping for, and that’s because there are a wide range of views around where the RBNZ could project the OCR to hit a maximum (currently 4.1%). This is likely to be what determines where short-term swap rates go, and by extension and correlation, where the Kiwi goes.”

FOMC minutes in the spotlight

The Fed minutes will shed light on the deliberations of the Federal Open Market Committee (FOMC) regarding the expected reduction in the pace of rate hikes. That being said, policymakers will also stress that the final rate is likely to be rising against earlier expectations as the labor market remains too tight. Data-wise, we expect the manufacturing PMI to retrace modestly, holding above the 50 level in November,” analysts at TD Securities said.