Kiwi choppy as risk sentiment ebs and flows
Thursday 18 June, 2020
Daily Currency UpdateMoves across currency markets were largely muted through trade on Wednesday and the NZD struggled to break a 30-point range. For the most part the New Zealand dollar bounced between 0.6440 and 0.6470 as investors sentiment fluctuated amid the promise of additional fiscal and monetary support and an alarming uptick in the number of new Coronavirus infections in the US and China. The Kiwi was forced to intraday lows at 0.6433 as another cluster of new infections in Beijing forced officials to ground flights out the city, shut down schools and block off infected neighbourhoods in a bid to control the virus. With the number of new infections jumping to 137 fears a second wave of infections could derail the Chinese economic recovery weighed on risk sentiment throughout the Australasian trading day. The NZD then found support, as equities pushed marginally higher and the broader risk tone improved following comments from Fed President Jerome Powell. Powell reiterated the Fed’s commitment to doing whatever it takes to guide the economy through this crisis while imploring US lawmakers to issue additional fiscal support packages to bolster and underpin the recovery.
Attentions today turn to first quarter GDP data. While markets have largely ignored backward looking fundamental, instead focusing on improving consumer and business sentiment as markers for future performance a softer than anticiapted growth print will likely weigh on the NZD as investors look to grapple with the true extent of economic damaged wreaked by the coronavirus pandemic. Watch support on moves below 0.64/0.6380 with resistance on moves above 0.6480/0.65.
Key MoversThe US dollar edged marginally higher through trade on Wednesday, when measured against a basket of major counterparts. The dollar advanced against the Euro and GBP while retreating against its safe haven companions and remaining relatively range bound against growth and commodity sensitive currencies. Risk sentiment fluctuated amid the promise of sustained monetary policy support and a rise in coronavirus cases. Investors were buoyed by comments from Fed Chair Jerome Powell, wherein he re-iterated to US lawmakers the FOMC’s commitment to its current monetary policy program. The assurance of a sustained period of monetary policy stimulus emboldened markets and helped bolster demand for equities and risk assets. However, a surge in new infections across several US states did prompt some safe haven dollar buying. New Cases in Florida jumped nearly 3.5% bringing the rolling 7 day read to its highest level since the outbreak began. Despite the uptick in community transmitted cases the Governor has given little indication they intend to roll back the economic re-opening and re-introduce lockdown measures. The uptick in Florida perfectly illustrates just how far the US has to go before the pandemic is really under control and has forced many investors to begin pricing in a sustained downturn and elongated economic recovery as the broader medium-term dollar outlook remains negative.
Attentions today turn to US unemployment claims and the Bank of England’s monthly monetary policy statement and minutes. We anticipate the MPC will maintain the current cash rate at 0.1% while increasing its bond buying program. With the bank expected to meet its current QE targets in July the scale of bond purchases will likely increase by 100billion GBP. The ECB is also set to issue a new round of long-term bank loans. While deposit rates will likely remain at -0.5% the bank is expected to make borrowing rates more attractive in a bid to stimulate lending.
- NZD/USD: 0.6380 - 0.6520 ▲
- NZD/EUR: 0.5680 - 0.5820 ▲
- GBP/NZD: 1.9280 - 1.9630 ▼
- NZD/AUD: 0.9330 - 0.9420 ▲
- NZD/CAD: 0.8680 - 0.8790 ▲