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Kiwi range bound in low volatility environment

Daily Currency Update

NZD - New Zealand DollarThe New Zealand Dollar edged lower through trade on Wednesday, touching intraday lows at 0.6582. Despite an uptick in risk sentiment the NZD struggled to mount any meaningful upside momentum, hampered by weakness across the Chinese Yuan and positioning ahead of Friday’s inflation report. While broader moves remain within a largely confined range in a low volatility environment it is evident the Kiwi is still underperforming when compared to fair value estimates. With the RBNZ monetary policy outlook key in governing medium and longer term NZD direction attentions now turn to Friday’s CPI inflation report. An upside surprise should dampen calls for additional RBNZ rate cuts and act as a possible catalyst to break outside topside resistance at 0.6620/30, while a downturn amplifies calls to cut rates and drive domestic growth and could prompt a shift below 0.6580.

Key Movers

The US dollar index edged downward through trade on Wednesday, following the Yen and Swiss franc lower amid easing demand for safe haven assets. Early week concerns the Coronavirus would spread beyond China and develop into a SARS like epidemic abated Wednesday as Chinese health officials proffer greater transparency into the viruses management and its path to limiting the global fallout. The Canadian Dollar slipped in the wake of the Bank of Canada’s monthly monetary policy meeting. While policy setter’s opted to leave rates on hold at 1.75% there was suggestion a rate cut would be appropriate should the recent slowdown on growth continue.The Great British Pound advanced through trade on Wednesday following a stronger than expected uptick in manufacturer’s sentiment, dampening calls for a Bank of England rate cut next week. Expectations for a policy shift have abated through the week thus far with futures pricing in a 50% chance of a rate cut on January 30, down from 70% on Monday. Advancing to one month highs against the Euro and two week highs against the USD our attentions now turn to Friday’s PMI print, a key indicator which could sway the interest rate debate.

Expected Ranges

  • NZD/USD: 0.6580 - 0.6630 ▼
  • NZD/EUR: 0.5890 - 0.5970 ▼
  • GBP/NZD: 1.9750 - 2.0150 ▲
  • NZD/AUD: 0.9580 - 0.9690 ▲
  • NZD/CAD: 0.8610 - 0.8730 ▲