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Kiwi elevated as Fed rate cut priced in

Daily Currency Update

The New Zealand dollar bounced back through trade on Monday buoyed by broad based US weakness and an upturn in demand for risk. The US dollar moved sharply lower amid expectations the Fed will cut rates later this month, following comments from Fed Chair Jerome Powell and reports G7 central bankers will conduct a conference call to discuss a coordinated monetary policy response to the spreading coronavirus. With the first case in New Zealand confirmed the likelihood of a near term RBNZ rate cut has increased and remains a risk to the further Kiwi stabilization moving forward. 

Attentions today turn to the RBA’s policy meeting for guidance and a possible marker for a shift toward outperformance in NZD/AUD while resistance remains in play on moves approaching 0.6280/0.63 on NZD/USD.

Key Movers

The Great British Pound continued its slide through trade on Monday, marking new four and a half month lows against both the USD and Euro. Investors adopted a cautious approach when evaluating day one of trade talks between the UK and EU, forcing Sterling below 1.28 to touch 1.2770. Officials sat down in Brussels for the first round of post Brexit trade talks with markets keenly attuned to any sign Britain will accept EU trade rules. Investors remain wary both parties will continue to kick the can down the road and fail to reach a comparable compromise before the 11th hour of negotiations with Sterling highly vulnerable to any headline comment suggesting trade discussions have stalled. Essentially, we are entering Brexit 2.0 as the next phase of the divorce proceedings begin. 

The US dollar slipped against a basket of major counterparts through trade on Monday as investors increased bets the Federal Reserve will cut interest rates in a bid to combat the downturn forced by the spreading coronavirus.  The dollar index slipped to one-month lows testing 97.50 following comments from Fed Chair Jerome Powell wherein, he committed to acting appropriately to support the economy. Markets saw Powell’s comments as guidance an imminent rate cut is on the table with bets the FOMC will cut rates at its March 17-18 fully priced in.

Expected Ranges

  • NZD/USD: 0.6180 - 0.6310 ▲
  • NZD/EUR: 0.5580 - 0.5660 ▼
  • GBP/NZD: 2.0180 - 2.0620 ▼
  • NZD/AUD: 0.9540 - 0.9630 ▼
  • NZD/CAD: 0.8290 - 0.8390 ▲