NZD/USD bears move as Wall Street dips

• The NZD/USD pair falls in tandem with the Australian dollar and US stocks in the closing hours on Wall Street.
• Investors are nervous ahead of critical events including the Fed, NFP and NZD on market data.

The NZD/USD pair is melting in the latter part of the US session as US stocks fall pre-close in a choppy start to the week ahead of critical events. At the time of writing these lines, the NZD/USD pair is losing 0.13% and has fallen from a high of 0.6508 to a low of 0.6472, after marking a new low in New York trading.

Moves on Wall Street have been led by the technology-focused Nasdaq, which is down more than 1% on Monday as large-cap growth stocks such as Apple, Amazon and Alphabet all fell ahead of the earnings reports this week. The antipodes are high beta currencies that tend to track global stocks, hence the bird’s drop.

Upcoming key events

The main focus of attention in the markets will be the Federal Reserve and the US Non-Farm Payrolls, both events could be fundamental for the currency space. Likewise, there is domestic labor market data on the calendar for the Kiwi. “We expect another firm labor market number in the fourth quarter, although we don’t think it’s a game changer to propel the Reserve Bank of New Zealand up 75 basis points after the fourth quarter CPI print from the last week missed the RBNZ forecast,” argued analysts at TD Securities. However, we believe that a terminal rate of 5% is necessary to quell the risk of a wage-price spiral, as quarterly wage growth picks up and sets a new annual wage growth record.”

As for the Fed, markets expect the Fed’s benchmark rate to peak at 4.93% in June, from 4.33% today, and for the central bank to cut it to 4.52% in December. However, Fed officials have resisted market calls for a turnaround, saying they will have to keep rates in tight territory for a while to reduce inflation.

For their part, ANZ Bank analysts said in a note today that “the kiwi has performed well, but the overall business cycle is turning, and US markets have room to ‘price in’ a lot of haircuts, which should help the dollar. But let’s move on to tomorrow’s NZ jobs data.”