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Kiwi struggles against key counterparts

Daily Currency Update

The New Zealand dollar traded sideways for much of Wednesday, struggling to break outside a 30-point band and bouncing between 0.6645 and 0.6675. Despite broad based USD weakness and a Dovish Federal Reserve, the NZD remained range bound while edging lower against other key counterparts. The Kiwi struggled to break back above 0.93 against the AUD, drifting toward intraday lows at 0.6265, while the Euro upturn forced the kiwi back below 0.5650 and the pound pushed back toward 1.95. Having rallied through resistance last week the NZD upturn has stalled, failing to consolidate forays above 0.67 as investors appear wary of extending gains amid heightened COVID-19 uncertainty. The US remains the global epicentre while Europe appears on the cusp of a second wave and Hong Kong’s medical system struggle to cope with an influx of new infections. With international borders likely to be closed through the rest of the year and into 2021 the NZ economy will be slower to rebound as its reliance on tourism outweighs that of major counterparts. While we still expect the NZD could extend gains against the USD it remains under pressure when compared with key major crosses.
Attentions today remain with US fiscal stimulus negotiations as the deadline to reinstate unemployment benefits draws ever nearer.

Key Movers

The US dollar marked a fresh two-year low on Wednesday as the FED affirmed its dovish stance and offered little in the way of forward guidance. The FOMC reiterated its pledge to commits its full suite of monetary policy tools for as long as it takes to guide the economy through the recession triggered by the COVID-19 outbreak. Fed Chair Jerome Powell painted a bleak picture as the US struggle to contain the virus and 21 States have been urged to roll back social distancing restrictions in a bid to curtail the spread and ease the pressure on the hospital system. The dollar index fell to 93.17 its lowest point since June 2018.
The Euro made fresh highs, pushing through 1.18 to touch intraday highs at 1.1805. Investors continue to dump the USD in favour of the single unit as EU fiscal support and COVID-19 containment open the door to a faster paced recovery than that likely in the US. With expectations the Fed will maintain it ultra-loose monetary policy setting well into the future the dollar outlook remains bleak. Key fundamentals that previously propped up the worlds base currency have been rapidly eroded and right now the only point of support is shifting risk demand.
The Great British Pound pushed ever nearer 1.30, touching intraday highs at 1.2995 as broad based US dollar weakness helped the embattled currency continue its recovery off June and early July lows. While Sterling has enjoyed a brief upturn, our broader view remains bearish as Brexit uncertainty and questions over the economies ability to rebound after the Pandemic weigh on the currency.

Expected Ranges

  • NZD/EUR: 0.5580 - 0.5710 ▼
  • GBP/NZD: 1.9280 - 1.9620 ▲
  • NZD/AUD: 0.9240 - 0.9330 ▼
  • NZD/CAD: 0.8820 - 0.8930 ▼