Kiwi leads losses across majors as risk aversion prompt push to haven assets
Daily Currency UpdateThe New Zealand continued Friday’s downturn, leading losses across major currencies and testing a break below 0.71 US cents as risk aversion pushed investors toward haven currencies. While volumes remained thin thanks to the US holiday in observance of Martin Luther King Jnr, markets focus on short term headwinds and worsening COVID 19 conditions continued to outweigh medium term optimism. The UK, US, Latin and South America, Europe and Japan are all struggling to contain resurgent COVID 19 case numbers amid rushed national immunisation programs. Early hopes a return to normal economic activity would be possible at the end of H1 are rapidly fading as national lockdowns will likely be in place in some form or another until March. This coupled with logistical delays pushing out the timeline of vaccine programs well into Q3 means demand for risk will remain vulnerable.
With little outside domestic business confidence data on hand today our focus remains with broader market trends. With the NZD bouncing off 3-week lows and pushing back through 0.71 on open we anticipate the NZD will continue to fluctuate amid a narrowed range between 0.7050 and 0.7300.
Key MoversSafe haven assets led gains across majors last night as investors shifted away from emerging markets and commodity currencies amid worsening COVID conditions and short-term headwinds. The JPY and CHF both outpaced major counterparts as concerns growing infection numbers will mean longer national lockdowns and an extended timeline to recovery. The Great British Pound drifter toward intraday lows at 1.3520 as official reports showed the highest number of fatalities for a Sunday since the Pandemic began. The impact of national lockdowns in the UK has been slow and while numbers are trending in the right direction, hospitalisations remain shockingly high as 2 Brits are hospitalized every minute with COVID 19. With lockdowns expected to remain in place until March at least the government continues to push its vaccine roll out, however with estimates a full program will not be complete until September the realities of another year of COVID 19 restrictions are beginning to weigh on investors medium term optimism.
Our attentions this week remain with pandemic and the short-term risk response. We look to Biden’s inauguration on Wednesday for a peaceful transition of power, with protests expected across the country, increasing violence could add further weigh behind the recent risk off shift. On the macroeconomic front we look to European and US PMI data as key markers of recovery. A softening in German and French performance could prompt further divergence in economic activity between Europe and the US and weigh on the combined unit. We are watching supports at 1.20 for now with a break below this handle a possible signal of further Euro weakness.
- NZD/USD: 0.7050 - 0.7220 ▼
- NZD/EUR: 0.5850 - 0.5930 ▼
- GBP/NZD: 1.8980 - 1.9220 ▲
- NZD/AUD: 0.9210 - 0.9320 ▼
- NZD/CAD: 0.9020 - 0.9120 ▼