NZD/USD slides to lowest since late February under 0.6700 as buck rallies

• NZD/USD is down another 0.8% to the 0.6675 region amid a risk-off backdrop and a strong buck.
• NZD/USD is trading at its weakest since late February and is down roughly 2.0% versus earlier weekly highs above 0.6800.

Though by no means the worst-performing of the major risk-sensitive G10 currencies, the kiwi is nonetheless suffering amid a combination of weakness in the European equity space and strength in the US dollar as markets digest recent hawkish central bank chatter. NZD/USD was last trading down about 0.8% on the day near the 0.6675 level and at its lowest levels since late February, a roughly 2.0% reversal lower from earlier weekly highs above 0.6800 when the pair tested its 50-Day Moving Average.

On which note, technical selling as a result of the earlier failure to break back above the 50DMA is another factor to consider as to why the pair has come under such intense selling pressure over the past two days. Thursday’s not as hot as feared Q1 2022 New Zealand Consumer Price Inflation report likely also didn’t help the kiwi’s cause, given that it has (very slightly) taken the pressure off the RBNZ to raise interest rates as aggressively in the coming quarters.

Of course, an admittedly small reduction in RBNZ tightening bets comes at a time when major US banks are falling over themselves to hawkishly revise their Fed policy calls for the next few meetings. In wake of remarks from various Fed policymakers including Chairman Jerome Powell over the last few days, the consensus view on Wall Street now appears to be that the Fed will raise rates by at least 50 bps at its next three meetings, and might go 75.

Risk appetite in the global equity space is ropey as a result, not least because ECB policymakers have also been talking about possible rate hikes as soon as July this week, and this makes for an unfavourable backdrop for NZD/USD. Bears will likely be eyeing a test of support in the form of the late February lows at 0.6630 in the coming sessions. Before FX markets wind down for the weekend, flash April PMI survey results for the US are released at 1445BST and could trigger some FX market volatility.