Daily Currency Update
NZD - New Zealand DollarThe New Zealand dollar was the worst performing major unit through trade on Tuesday drifting lower despite broad based US weakness and an uptick in equity markets. Having tested resistance at 0.66 through trade on Monday the NZD has slipped back toward 0.65 touching intraday lows at 0.6509. The currency remains at the mercy of broader risk trends and as the number of COVID-19 cases around the world continue to rise at an alarming rate the hope of a swift global economic rebound has faltered. Markets are reluctant to extend gains across risk correlated currencies instead narrowing ranges as the ebb and flow of risk aversion dominates direction. We expect the NZD will remain largely range bound throughout Q3 as markets continue to ignore underlying macroeconomic fundamentals. Having failed to extend beyond 0.66 the NZD will likely bounce between .6380 and 0.66 with added downside supports in play on moves approaching 0.62. Attentions this week remain squarely affixed to COVID-19 headlines while the EU summit provides a window into the progress of the EU recovery plan. Should an agreement be reached we could see the NZD/EUR cross come under pressure as the common currency enjoys an extended upturn.
Key Movers
The US dollar drifted lower through trade on Tuesday as inflation expectations increased. US CPI data showed prices in June jumped over half a percent (largely driven by a near 13% increase in petrol prices) raising concerns the record levels of fiscal stimulus are going to drive living costs higher at a time the Federal Reserve cannot increase interest rates, potentially derailing any consumer led recovery. The Euro upturn continued Tuesday pushing through 1.14 as investors eye this week’s EU summit and potential rescue package. The promise of a 750 billion euro recovery fund has helped drive the combined unit higher as markets begin pricing in a swift EU recovery. As the US continues to battle the COVID-19 outbreak expectations eurozone will be better placed to bounce out of the pandemic are increasing opening the door to extended Euro gains through the medium term.
Expected Ranges
- NZD/USD: 0.6450 - 0.6590 ▼
- NZD/EUR: 0.5680 - 0.5820 ▼
- GBP/NZD: 1.9020 - 1.9280 ▲
- NZD/AUD: 0.9330 - 0.9450 ▼
- NZD/CAD: 0.8830 - 0.8950 ▼