Kiwi lacks direction ahead of employment data
Wednesday 3 February, 2021
Daily Currency UpdateNZD - New Zealand DollarThe New Zealand dollar failed to capitalise on gains across equity markets, largely sidelined through trade on Tuesday as investors focus shifted to the Australian Reserve Bank and sustained USD upside. The Kiwi edged marginally higher through the domestic session eyeing a run at 0.72 US cents before resistance forced the currency toward intraday lows at 0.7135 and an overnight range between 0.7140 and 0.7170. The NZD pushed through 0.94 against the AUD extending to touch 0.9440 following the RBA policy surprise. The NZD has well and truly reversed the downtrend suffered through Q4 last year and our attentions now turn to the RBNZ and its response. Employment data will provide some insight into domestic economic health ahead of the official RBNZ policy meeting in two weeks’ time. Given the RBA’s cautious outlook direction will depend on whether the RBNZ chooses to follow suit.
Key MoversThe USD found sustained support through trade on Tuesday, buoyed by extension in euro downside and a divergence in currency market movements and equity performance. The dollar index edged upward as the euro approached supports at 1.20 despite stronger than anticipated GDP data sets. Eurozone GDP contracted just 0.7% through Q4, well ahead of estimates suggesting a 2% decline. The positive print provides some hope the common market can rebound strongly, however with national lockdown still in place across many countries and the vaccine roll out slow, a H1 recovery is unlikely with growth suppressed through Q1 and Q2. Our attentions turn now to the Bank of England policy meeting and monetary policy statement tomorrow. With the UK firmly entwined in the throes of the Pandemic and early Brexit adjustments weighing on the growth outlook we expect the BoE will maintain its accommodative policy platform. With expectations for a shift to negative rate moderating over recent weeks, any signal policymakers are considering further interest rate adjustments will weigh on the GBP. For now optimism and a rapid vaccine roll out continue to prop up sterling, and we expect the currency will hold onto gains above 1.35 with resistance on moves approaching 1.40.
- NZD/USD: 0.7080 - 0.7205 ▼
- NZD/EUR: 0.5920 - 0.5980 ▲
- GBP/NZD: 1.8920 - 1.9180 ▼
- NZD/AUD: 0.9360 - 0.9450 ▲
- NZD/CAD: 0.9080 - 0.9220 ▼