Kiwi falls short of a push through 0.66 as risk demand falters

Daily Currency Update

NZD - New Zealand DollarThe New Zealand dollar opens lower this morning following a correction in risk appetite. Having drifted sideways for much of the domestic session, the NZD crept toward fresh year-to-date highs, touching 0.66 as strength across Chinese equities helped drive the weeks positive risk-on mood. The NZD however, failed to hold onto gains throughout the European and US sessions as risk demand faltered, following another surge in COVID-19 cases across the US and a supreme court ruling that will allow New York prosecutors access to President Trump’s financial records. The President has always refused to provide his financial records, as is the custom, and the supreme court ruling opens the door to further political turmoil. The global risk narrative continues to drive direction and while the optimism of April and May has faltered, the back drop of fiscal and monetary support has ensured a positive risk correlation remains in play. Markets are continuing to ignore domestic and global macroeconomic fundamentals and instead continue to react to changes in headline news and the fight against COVID-19. With currency movements muted through the last 2-3 weeks and broader ranges narrowing, we expect the NZD will remain range bound through much of Q3 bouncing between 0.6380 and 0.6620. Until the focus shifts back to key fundamental data sets and broader economic performance any break outside these ranges requires a distinct change in the current risk narrative.