NZD/USD slides on Monday, testing Feb lows

NZD/USD has been forced lower at the start of the week as the US dollar rallies. At 0.6605, the kiwi is lower by 0.43% and has fallen from a high of 0.6636 and reached a low of 0.6597. Risk aversion is denting the commodity complex as Covid risks rear their ugly head in the open. 

The Chinese Covid-19 outbreak may have been spreading in Bejing for a week, city authorities said on Saturday at a press briefing who are tracking cases across multiple districts. The capital reported 22 new local cases on Saturday, national health authorities said Sunday morning.

"The city has recently seen several outbreaks involving multiple transmission chains, and the risk of continued and undetected transmission is high. The situation is urgent and grim," municipal official Tian Wei told reporters Saturday. "The whole city must act immediately."

Nevertheless, the central banks will come back into vogue with hawkish rhetoric coming from both the Federal Reserve and the Reserve Bank of New Zealand. ''We now expect the Reserve Bank of New Zealand (RBNZ) to hike the official cash rate (OCR) by 50bps at the May meeting and another 25bps in July to bring the OCR to 2.25%, slightly above neutral (estimated at 2.0%),'' analysts at Standard Charted said. 

However, the Fed is taking up the attention of markets as policymakers express a need for 50-bps rate hikes to the Federal Funds Rates (FFR); even a 75-bps rate hike was considered by the hawkish St. Louis Fed President Bullard. Nomura is also predicting that after a 50 bps rate hike in May, the Fed would follow up with two 75 bps rate hikes in June and July. Fed Chair Powell, was saying last week that a 50-bps rate hike in the May meeting “is on the table.”