Kiwi outpaces major counterparts to test key resistance handles
Friday 1 May, 2020
Daily Currency UpdateThe New Zealand dollar surged upward through trade on Wednesday, outpacing major counterparts, advancing 1.1% on the day and testing resistance at .6130. Sustained strength across equity markets and reports a government trial showed Remdesivir had delivered promising outcomes when used in the fight against coronavirus helped fuel demand for risk assets. Having broken above 0.61 the NZD found further support in broad based US weakness following the Federal Reserves monthly policy meeting. The Fed vowed to continue its platform of QE, doing whatever it takes to backstop the economy throughout the COVID19 crisis. As the dollar index fell the NZD extended gains, testing mid-month highs at 0.6130, touching 0.6137 before flattening into this morning’s open.
Attentions now turn to Chinese Manufacturing and Services PMI data and the ECB as the big ticket items crowding the macroeconomic docket. With risk demand continuing to drive direction any signal the global economy can and is rebooting sooner than anticipated will help fuel the current risk on rally and perhaps prompt a consolidated break above this resistance handle and a move back toward 0.62.
Key MoversThe US dollar fell for a third straight session, succumbing to improvements in risk demand and a commitment to uber loose monetary policy conditions from the Federal Reserve. Reports government trials of Remdesivir have proffered promising results helped bolster demand for commodity led and emerging market currencies, while traditional safe havens were forced lower, under-performing against most major counterparts. The Dollar index slipped back below 100, losing three tenths of one percent and testing two week lows at 99.44.
Having touched a 3 year high in March the dollar has slowly edged lower marking a series of lower lows and lower highs as confidence across financial markets grows and risk demand improves. Attentions are starting to turn away from the virus itself with risk demand driven by the prospect of the global economy opening sooner rather than later. With the US still heavily entrenched in a battle against the coronavirus and the Federal reserve committing to a program of uber loose monetary policy measures the attractiveness of the worlds base currency is beginning to falter. That said, there are still a vast number of uncertainties that cloud forward guidance and the current risk on run is certainly vulnerable to a swift reversal. As long as the virus remains prevalent the USD will find risk based support.
Attentions today turn to the ECB and its monthly policy meeting. With no major policy announcement expected attentions still remain with EU leaders and the promise of a detailed coronavirus rescue plan. Until specifics are released we expect the Euro will remain vulnerable to further downside.
- NZD/USD: 0.5950 - 0.6180 ▲
- NZD/EUR: 0.5490 - 0.5720 ▲
- GBP/NZD: 2.0010 - 2.0520 ▼
- NZD/AUD: 0.9320 - 0.9410 ▲
- NZD/CAD: 0.8450 - 0.8580 ▲