Kiwi tumbles as risk off mood sweeps markets
Wednesday 19 February, 2020
Daily Currency UpdateNZD - New Zealand DollarThe New Zealand dollar fell through trade on Tuesday, slipping back below 0.64US cents. Despite the absence of domestic macroeconomic data the NZD gave up almost 1% as a broad based sell off of risk assets, USD upturn and an AUD downturn drove the currency sharply lower. Markets appetite for risk shifted following Apple’s announcement it does not expect to meet revenue targets through Q1 2020 as the coronavirus dampens demand for sales in China. Apple’s revelation highlighted broader market concerns the Coronavirus will have a direct deflationary impact on global consumer demand and economic growth forecasts. Furthermore, dairy prices fell overnight, and while in line with broader forecasts, perhaps highlight New Zealand’s agricultural exposure and risks for a downturn in Chinese demand driven by the coronavirus. While the impact on the value of currency was largely muted sustained downside across milk and dairy prices could begin filtering through to market valuations and add to recent short-term downside.
Key MoversSafe haven assets surged through trade on Tuesday with the Japanese Yen outperforming most major counterparts. The Great British Pound edged higher as the new Finance Minister Rishi Sunak announced the budget would be unveiled as planned on March 11. Shrugging aside concerns conflicting views between the UK and EU would derail trade negotiations sterling pushed back through 1.30, touching 1.3047 before correcting lower into the mornings open.The Euro tumbled through 1.08 Tuesday following a ZEW assessment of broad based German confidence. Sentiment among investors deteriorated well beyond initial estimates in February and highlighted concerns Europe’s largest economy and engine room is running out of steam. The poor print amplifies concerns services and manufacturing PMI data due Friday will show an alarming slowdown in broader European production further dampening growth expectations and widening the gap between the US and EU outlook. The combined currency has lost almost 4% through the year to date, with little incentive for investors to unwind recent shorts and carry trades. Having touched 1.0787 attentions now turn to Thursdays’ ECB monetary policy meeting minutes for any sign increased QE is imminent.
- NZD/USD: 0.6350 - 0.6450 ▼
- NZD/EUR: 0.5870 - 0.5950 ▼
- GBP/NZD: 2.0190 - 2.0590 ▲
- NZD/AUD: 0.9490 - 0.9630 ▼
- NZD/CAD: 0.8410 - 0.8530 ▼