NZD/USD Eyeing Sub 0.6100 Test

NZD/USD traded with a strong beta with respect to risk off moves through the overnight session on Friday. The pair sank to sub 0.6140 and we have continued to track lower in early trade today, last at 0.6125 (-0.20% versus last week’s closing levels). A test below 0.6100 could be eyed. Note the July 14th YTD low came in just above 0.6060.

• The data calendar is empty today, with July building permits out tomorrow. There could be some spill over from the AU retail sales print though.
• Recall last week, the NZ Q2 retail sales print came in sharply below expectations. This helped drive the Citi NZ surprise index back to -52.10, which is not too far away from mid June lows.
• Recession risks/talk in NZ is unlikely to diminish, although RBNZ Governor Orr doesn't expect the economy to experience a technical recession.
• Such a backdrop is likely to keep NZD sensitive to offshore drivers, particularly risk appetite in the equity space.
• NZD is slightly outperforming AUD in the first part of trading today. However, we remain comfortably above 1.1220 in the pair (highs from Friday evening were just shy of 1.1260).