NZD/USD is under pressure in a sea of red for equities

• NZD/USD bears sinking in their teeth in the open. 
• Risk-off sentiment is hurting the high beat currencies. 

NZD/USD is pressured on Monday as risk-off sentiment weighs on the high beta currency complex. At 0.6380, the bird is down some 0.38% and has fallen from a high of 0.6412 to a low of 0.6377.

Asian equities are in a sea of red and the US dollar is higher at the start of the week. The greenback continues to be buttressed by sharply rising US yields as lockdowns in China, the Ukraine crisis and higher interest rates.

China’s COVID-19 outbreaks have darkened the outlook for risk sentiment on Monday. Reuters has reported that Shanghai is tightening its already strict COVID-19 lockdown in a fresh push to eliminate infections outside quarantined areas of China’s biggest city by late this month.

''While NZD volatility has died down compared to the 24hrs after the Fed meeting, high volatility is still being seen in bond (and equity) markets, with US bond yields edging another notch higher following stronger jobs data,'' analysts at ANZ Bank said. 

''It is hard to anticipate any let-up in generalised volatility given this week’s data schedule, with US Consumer Price Index topping the list, and NZ inflation expectations data also due.''

''Risks around US CPI feel binary,'' the analysts at ANZ Bank said. ''A moderation from 8.5% (to 8.1% as markets expect) would be mildly comforting, but a lift would doubtless revive expectations for 75bp Fed hikes, and probably give the USD a boost. The idea that synchronised global tightening might proceed gently now feels like a forgotten dream as the reality of volatility bites.''

Analysts at TD Securities explained that the ''core prices likely stayed strong in April, regaining momentum to 0.5% m/m after recording 0.3% in March. While used vehicles prices likely declined again, they probably fell less sharply than in the last report. We also look for renewed strength in shelter inflation. Our MoM forecasts imply 8.1%/6.1% YoY for total/core prices, likely confirming March was the peak of the cycle.''

Meanwhile, there will also be Fed speakers this week. Governor Christopher Waller and New York Fed's John Williams could be important. Traders will be hoping for comments to shed some light after Fed Chairman Jerome Powell's presser last week that failed to offer much in the way of clarity on what the Fed will do after frontloading rate hikes until neutral. 

For the day ahead, traders await trade data from China that is speculated to show a further slowing in export growth and weakness in imports with most provinces under some form of restrictions and Shanghai in a full month of lockdown.