NZD/USD is back under pressure in choppy condiitons

• NZD/USD is fsoggy in Asia as risk sentiment ebbs and flows.
• The Omicron variant continues to spread around the world.

At 0.6764, NZD/USD is higher on the day so far and has travelled between a low of 0.6756 to a high of 0.6773. However, there are a number of risks in play that could hinder any significant progress in the bird and the market is a little choppy.

The Kiwi was struggling a little this morning in the face of the generalised slump in global risk appetite overnight, as analysts at ANZ Bank pointed out, arguing that the price action still looks soggy.

''Market chatter points the finger of blame for the rout on the usual suspects – inflation, tighter policy and COVID, and in that environment, given how much positivity is priced in locally, New Zealand seemingly does have more to lose than other countries.''

''As we noted yesterday, the New Zealand economy benefitted from the outsized stimulus in 2020/21, but that was all funded by debt, and that could come home to roost in 2022,'' the analysts at ANZ argued.

Meanwhile, the Omicron variant continues to spread around the world. Inflation is a critical risk due to threats of lockdown and subsequent reopening of economic activity and pent up demand.  

''Across the Tasman, worker absenteeism (as people isolate) is a significant constraint on some goods and services, adding to the inflationary soup,'' the analysts at ANZ bank said.

''New Zealand would likely be no different should Omicron case numbers spike here. We’re currently expecting annual CPI inflation to peak in Q1 at 5.8%, but renewed supply disruptions on the back of an Omicron outbreak could easily see inflation peak higher and later.''