Risk appetite recovery in April, despite the war
Risk appetite bounced back strongly in April, supported by the US-Iran ceasefire and hope that the Strait of Hormuz would soon reopen. After plunging in March, the MSCI AC World Equity index surged over 9% in April while oil prices fell back. The USD was broadly weaker, while the NZD and AUD outperformed, with NZD/USD closing up nearly 3% to just over 0.59. Rates markets were range-bound. NZ’s rates curve was higher and flatter, after the RBNZ adopted a more hawkish policy tone and CPI data were stronger than expected.
Iran conflict drives NZD lower through March
• The Iran conflict erupted just before March and was the primary driver of financial markets throughout the month
• As the conflict escalated, oil prices spiked, global equities tumbled, and global interest rates surged on renewed inflation fears
• NZD/USD dropped over 4%, and the NZD weakened against all key currencies