NZD/USD recovers after brief slip below 0.7200
- NZD/USD has recovered following a brief slip below the 0.7200 level in recent trade but trades below session highs.
- The main factor weighing on NZD/USD on Tuesday has been a reversal of the US dollar’s fortunes.
NZD/USD has recovered following a brief slip below the 0.7200 level in recent trade. However, the currency pair still trades well below the six-week highs its set earlier on in the session of nearly as high as the 0.7270 mark. On the day, the pair trades with losses of around 0.15% or just over 10 pips.
Driving the day
The main factor weighing on NZD/USD on Tuesday has been a reversal of the US dollar’s fortunes. The buck was under pressure during the Asia Pacific session and early European session, but shot higher upon the arrival of US market participants to the market for the first time this week (note that US markets were closed on Monday for the Presidents’ Day public holiday).
Recent news that Auckland had gone back into a snap lockdown does not seem to have had a lasting impact on NZD sentiment and, according to ANZ, strong milk prices at Tuesday’s weekly GlobalDairyTrade auction are “a reminder of how well commodity prices are holding up.
US bond yields shooting higher
Helping lift the US dollar has been a shockingly swift rally in US bond yields; at present, the 10-year yield is closing in on the 1.30% level, a near 10bps rally on the day. Given the fact that the move is being mirrored in real yields (i.e. nominal yields are not being driven higher by expectations for higher inflation), the implication is that the market is betting on a strong US economic recovery and a Federal Reserve that does opt to taper its QE programme sooner rather than later.
Strong US data
Meanwhile, the buck was given a boost by the release of a much stronger than forecast NY Empire State Manufacturing Index survey (the headline number jumped to 12.1 in February versus expectations for a much more modest rise to 6.0 from 3.5 in January). The Dollar Index got a noticeable boost from the data, helping launch it back above 90.50.
The strong survey bodes well for the Philadelphia Fed Manufacturing survey and Markit PMI report set to be released on Thursday and Friday respectively this week. With Covid-19 infection rates in the US dropping sharply and precipitating further reopening, the impact of January stimulus starting to be felt and expectations for further fiscal stimulus ahead, US economic data is set to improve over the coming months.
“”Source From Fxstreet””