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Kiwi resilient despite stronger Greenback

Daily Currency Update

The Kiwi has remained relatively resilient despite a bullish United States Dollar in overnight trading, opening this morning at 0.6760.

The New Zealand Dollar had little to digest on the economic calendar and took its cues from off-shore forces. Initially in the session the Kiwi did manage to trade higher after the spill-over effects of a decent Australian unemployment rate release supported the NZD. The Kiwi then moved even higher, trading slightly above the 0.68 level. Ultimately however, the softer European PMI numbers and dovish ECB statement conspired to undermine global risk sentiment which led to a stronger Greenback, and a falling Kiwi.

The Kiwi, Aussie cross rate also enjoyed a significant strengthening after the Aussie reversed trajectory later during the session. NAB increased the floating mortgage rates by 12-16bps to be more in line with the other banks. The market however, interpreted the move as increasing the chances of a RBA cut later in the year and undermining the Aussie. The cross trades this morning at 0.9540.

The New Zealand Dollar is again set to enjoy a quiet day on the economic calendar with direction driven by global headlines.

Key Movers

The Australian Dollar plummeted against the United States Dollar during yesterday’s trading session to hit a one week low of 0.7083. There was a spike after the release of the Australian Bureau of Statistics unemployment report which came in higher and around it’s forecasted figures. The employment change data, represents the change in the number of employed people during the previous month came in at 21.6k, higher than it’s forecast of 17.3k. This rise reversed course as major bank NAB increased it’s variable mortgage rates, following a move by other major banks last year.

With a lack of macroeconomic data for the AUD in the near future, there may be some volatility on Monday due to Australia observing as public holiday. While the Australian banks are closed, the market is less liquid. During this time, speculators become a more dominant market influence and can cause volatility.

The Great British Pound remains relatively unchanged despite some softer than expected European PMI numbers. The Sterling worked its way slightly lower against its US counterpart to open this morning at 1.3057.

The hard-hitting news overnight originated from the Eurozone with soft PMI data and downside growth risk warnings by the ECB undermining the Euro. The softer numbers and statement spread like a contagion, reversing market sentiment although the impact was primarily limited to US treasury yields, commodity currencies and of course the eurozone. The United States Dollar did however reverse the weekly trend and appreciate on the news, forcing the Sterling lower.

The Great British Pound is now set to enjoy a quiet close to the week with little on the economic calendar to digest but will of course keep a close eye on Brexit developments.

The United States Dollar rose against the Australian Dollar yesterday to break through the resistance ceiling of 1.4, to open at 1.4119 this morning. The rise comes upon a weaker AUD as it has underperformed after NAB raised mortgage rates. The US Government shutdown continues preventing macroeconomic releases. Lawmakers have no clear path to reopening 9 unfunded departments as US President Donald Trump relentless in his demand for $5.7billion for his proposed border wall.

Financial firm Market released their data on Flash PMI earlier this morning, measuring the level of diffusion index based on surveyed purchasing managers in the manufacturing and services industry. The figures came back at 54.9 and 54.2 respectively, indicating industry expansion and better figures than what was forecasted. In the long term, we await further updates regarding the US-China trade war as US trade representative Robert Lighthizer and Chinese Vice Premier Liu expect to meet later this month.

The Euro dollar suffered a heavy sell-off against the Greenback as investors squared out of their long positions following Mario Draghi’s interest rate decision and his press conference speech. Weak Eurozone didn’t help matters, EUR/USD slid down from 1.1391 down to 1.1289 and breaking the long-term support of 1.1300.

Flash Manufacturing for the Eurozone fell to 50.7 in January down from 51.1 in December, this was the lowest level since 2013. Export orders continued to slide. The culprit behind the subdued momentum remains global demand, but trade wars and the still embattled automotive sector were reportedly at play.

The ECB left its monetary policy unchanged which was widely expected. However, the ECB has finally admitted that the growth risks are now biased downwards, blaming protectionism for the change. The ECB stated that there would be no changes in their stance until the next staff projections are updated in March.

Looking ahead, German Ifo business climate is due for release. The Business Climate score has slowed down for four straight months, falling to 101.0 and missing the estimate. The negative trend is expected to continue, with an estimate of 100.7 points.

The Canadian Dollar seesawed through Thursday day of trading against the Greenback, moving within a tight range of approx.40 pips of 1.3332 and 1.3375. The so-called Loonie was hit by a stronger Dollar during North American trade and also affected by disappointing Canadian monthly retail sales data, showing a decline of 0.9% in November.

The pair has also been weighed down by a pull-back in crude oil prices. Oil prices lost some additional ground on Thursday amid lingering concerns over global economic growth, which coupled with some USD strength helped the pair regain positive traction and climb above mid-1.3300s.

Expected Ranges

  • NZD/AUD: 0.9325 - 0.9595 ▲
  • GBP/NZD: 1.9025 - 1.9390 ▲
  • NZD/USD: 0.6700 - 0.6820 ▲
  • NZD/EUR: 0.5900 - 0.6005 ▲
  • NZD/CAD: 0.8875 - 0.9105 ▲