Kiwi eye post COVID19 high as safe haven demand falters
Thursday 9 July, 2020
Daily Currency UpdateThe New Zealand dollar crept higher through trade on Wednesday, testing a break above 0.6580/0.66. Broad based US dollar weakness and a sustained run in risk demand helped drive the NZD to intraday highs at 0.6579. While risk demand continues to drive upward momentum the NZD found support in an uptick of Fonterra’s 2020/21 milk price futures. NZX milk futures pushed through $7 before edging lower into this morning’s open, supporting strong gains in this weeks Global Diary Trade auction and brightening the outlook for a key export. While the surge in futures did little to add to the upturn, the improvement in milk prices and the broader export outlook has reinforced supports at 0.64/0.6380 while opening the door to a run above current post COVID19 highs.
Risk demand continues to drive direction as markets weigh the positives of re-opening economies against the shadow of rising COVID19 infection rates. With a swift rebound in economic activity through the latter half of 2002 looking increasingly unlikely topside gains will remain hard won. Without a renewed surge in risk appetite we anticipate the NZD will continue to bounce between support at 0.65380 and resistance at 0.66/06620.
Key MoversThe Great British Pound rallied through trade on Wednesday, pushing through 1.26 following news of a new 30billion pound fiscal stimulus package. Chancellor of the Exchequer, Rishi Sunak, unveiled plans for new fiscal support program designed at driving and supporting the property market, while underpinning key retail and service sectors and providing tax incentives for employers to hold onto employees through this crisis. The plan is the next stage in the governments fiscal response to the economic destruction caused by COVID19, fueling market demand for the GBP.
The Euro was dragged higher by Sterling’s upturn pushing back through 1.13 to touch intraday highs at 1.1330, while the USD tumbled to a two week low. Reduced safe haven demand drove commodity currency higher, while extend fiscal stimulus helped support the GBP and Euro, forcing the DXY dollar index half a percent lower. With the US still the epicenter of the worlds fight against COVID19 investors are conscious that the worlds largest economy faces a protracted recovery period, fueling demand for other asset classes with nothing but haven demand propping up the worlds base unit.
- NZD/USD: 0.6380 - 0.6620 ▲
- NZD/EUR: 0.5720 - 0.5830 ▼
- GBP/NZD: 1.9020 - 1.9280 ▲
- NZD/AUD: 0.9390 - 0.9450 ▼
- NZD/CAD: 0.8810 - 0.8920 ▼