Kiwi breaks lower bounds following breakdown in US stimulus bill
Wednesday 7 October, 2020
Daily Currency UpdateNZD - New Zealand DollarThe New Zealand dollar offered little to excite investors through trade on Tuesday again maintaining a narrow trading band. The NZD found support early following a surprise uptick in the global dairy index, driven by a 2% surge in whole milk powder prices. Edging toward the top end of recent ranges at 0.6660 the NZD then drifted lower through the overnight session edging toward 0.6620 before a sharp decline and break back below 0.66 us cents. Equities and risk assets fell sharply, dragging the NZD lower after President Trump announced Republicans would be withdrawing from coronavirus relief talks. McConnell has reportedly been unable to garner support with the Senate to pass a stimulus bill prompting Trump to withdraw from talks in an attempt to protect McConnell leading into the election. Optimism a fiscal relief package would be struck before the election had helped drive risk demand through the last week and the recent about face all but certainly dashes any hope of short-term support for American’s struggling with the effects of the COVID-19 Pandemic. Having fallen to a fresh weekly low the NZD currently swaps hands at 0.6581. Attentions remain squarely affixed to fluctuations in sentiment and as headlines continue to dominate direction, we expect the NZD will continue to bounce between 0.64 and 0.68 US cents.
Key MoversThe US dollar recouped some of the week’s early losses through trade on Tuesday edging upward as markets looked to consolidate recent gains amid a shift in risk sentiment. Having crept upward the world's base currency enjoyed strong gains as investors rushed to exit equities and hold haven assets following President Trump's surprise withdrawal from COVID-19 fiscal relief talks. The expectation of government led support has been a key driver behind positive sentiment in recent months and the abrupt about face has dashed any hope a relief plan will be available ahead of the election, extending the timeline of hardship for millions of Americans and sapping the market of risk demand. The Great British Pound drifted lower following commentary from the EU affirming it will not make Brexit concessions ahead of next weeks EU summit. With Boris Johnson earmarking the summit as the deadline for a Brexit trade deal time is fast running out and while the market largely expects an 11th hours deal will be struck negative headlines will weigh heavily on the Pound in the lead up to the meeting of leaders. With resistance on moves approaching 1.30 attentions remain squarely affixed to Brexit development in determining both short and long term direction.
- NZD/USD: 0.6530 - 0.6660 ▼
- NZD/EUR: 0.5580 - 0.5650 ▼
- GBP/NZD: 1.9320 - 1.9680 ▼
- NZD/AUD: 0.9230 - 0.9330 ▲
- NZD/CAD: 0.8705 - 0.8830 ▼