Currency Market Analysis

Jan 25, 2022 | Currency Market Analysis

Global Themes

Kiwi recovers as US shares bounce back

• US shares rebound after wild night
• NZD benefits from reversal
• Australian CPI due at 1.30pm

NZD driven by rebound

The New Zealand dollar recovered from earlier losses overnight as US shares rebound from early losses.

The US’s Dow Jones index was down more than 1000 points overnight – 3.2% – before recovering to finish with a positive result.

Growing geopolitical tensions in Ukraine, along with worries ahead of Thursday morning’s US Federal Reserve decision, remain the key drivers of market volatility.

Bounce

The NZDUSD was also heavily sold overnight – falling to new 14-month lows – before recovering later in the session.

The NZDUSD ended with a 0.3% loss.

The kiwi was mixed in other markets with the NZDEUR up 0.1% while the NZDJPY also gained 0.1%

The NZDAUD was up 0.3% ahead of today’s Australian inflation reading.

Australian CPI

Today’s major event is the Australian inflation reading.

Although the Reserve Bank of Australia said in November that it is “extremely unlikely” to hike rates in 2022 (Australian Financial Review, 2 November), the market has taken a different view with four rate hikes priced in for this year.

With market pricing tilted to rate hikes, any miss in Australian inflation – or even a result in line with forecasts – might disappoint and pressure the AUD.

Australian CPI is expected at 3.2% in annual terms with the RBA’s preferred measure, the trimmed mean, forecast at 2.4%.

CPI is released at 1.30pm.


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