NZD/USD bulls step in as risk assets rise

• NZD/USD bulls move in to try and postpone the downside.
• RBNZ is in focus, a 50bps hike is expected. 

NZD/USD ended the week on the front foot, correcting some of the damage done on the longer-term charts to close just over 1% higher after rallying from a low of 0.6222 to a high of 0.6289. Risk currencies, such as the high beta kiwi, were boosted by a better performance in global stocks and US equities in the New York session. However, the US benchmarks still closed in the red for the week which does not sit well for the time ahead. 

The Dow Jones Industrial Average rose by 1.5% to 32,196.66, the S&P 500 rose 2.4% to 4,023.89 and the Nasdaq Composite was 3.8% higher at 11,805.00. Friday's gains, however, were not enough to pull the indexes from a weekly slump, as all three declined, with the Nasdaq 2.8% lower. The S&P 500 saw a weekly loss of 2.4% while the Dow slipped 2.1%.

"Nevertheless, domestic factors do matter for the NZD, analysts at ANZ Bank said. This week is a fairly quiet one locally until Thursday when we get the Budget, and these haven’t typically been big days for FX (unlike bonds). So we are left watching global events, at least until next week’s MPS. And in that regard, what happens next depends on how risk assets fare as bond yields likely edge higher, having corrected sharply lower last week. Risk assets are in essence playing chicken with the Fed – but the Fed is (publicly at least) showing no signs of flinching. And they’re not in a position to back down either, so brace for volatility," the analysts at ANZ Bank explained in full. 

RBNZ in focus

Meanwhile, ANZ Bank is expecting a rate hike from the central bank of 50 basis points as soon as May. "But with longer-term inflation expectations measures no longer accelerating sharply, the RBNZ may conclude that they have the flexibility to take things at a more normal pace from the second half of the year."