Kiwi out performs as promise of easing restrictions bolsters currency
Tuesday 21 April, 2020
Daily Currency UpdateNZD - New Zealand DollarThe New Zealand Dollar outperformed all majors through trade on Monday, buoyed by reports lockdown restrictions will be eased next Tuesday. Prime Minister Arden announced COVID 19 social distancing measures would be scaled back from level 4 to level 3 as the number of community transmitted cases continues to fall. Arden advised the level 3 restrictions will be in place for at least 2 weeks before they reassess the broader health status and potentially ease measures further. Bolstered by the possibility the domestic economy will begin opening up the NZD jumped through 0.6050 to touch intraday highs at .6089 before edging lower into this morning’s open. New Zealand has emerged as a world leader in the fight against the Coronavirus, effectively squashing the disease before it was able to take a hold within the broader community. Its proactive and aggressive approach should mean the NZ economy closes in on a return to normal well before major counterparts. With reports that death rates in the UK and US continue to rise and no end to lockdown measures in sight New Zealand, in comparison, appears well placed to bounce out of this health and economic crisis, adding some level of support to the NZD moving forward. With little of note on the macroeconomic docket today attentions remain squarely affixed to Coronavirus headlines for direction and fluctuations in risk demand.
Key MoversThe US dollar crept higher through trade on Monday, up 0.4% when compared with a basket of major counterparts, as oil prices tumbled and the Euro remained range bound ahead of a key EU summit this week. West Texas crude prices plunged lower as a lack of demand, a shortage of storage capacity and glut of supply forced a swift correction in short term future values. May Futures fell to minus $40 a barrel meaning sellers were willing to pay buyers to take the oil off their hands. The sharp correction appears to be caused by technical factors linked to capacity and storage issues in the near term thus limiting contagion into other financial instruments. That said, the correction in oil forced the CAD and NOK lower with both units underperforming through the day, down 0.8% and 1% respectively. Attentions now turn to the EU as leaders meet via video hook up on Thursday to extend discussions on how to deal with the economic fallout of COVID19. French President Emanuel Macron has backed plans for a specialised issuance of coronabonds in a bid to support embattled southern EU economies, like Italy. The plan has been met with strong opposition from Germany and Netherlands with both countries reluctant to issue blank cheques and effectively force their own taxpayers to bail out other EU member countries. With the EU divided the combined unit will likely come under increasing pressure through the short term.
- NZD/USD: 0.5920 - 0.6120 ▲
- NZD/EUR: 0.5480 - 0.5610 ▲
- GBP/NZD: 2.0320 - 2.0780 ▼
- NZD/AUD: 0.9480 - 0.9630 ▲
- NZD/CAD: 0.8380 - 0.8620 ▲