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NZD ticks higher as risk sentiment improves on reports containment measures are working

NZD - New Zealand Dollar

The NZD edged upward through trade on Monday testing 0.5950 US cents as risk assets enjoyed renewed support on optimism Europe may begin easing containment measures as Spain and Italy appear to have weathered the worst of the COVID19 pandemic. Spain reported its lowest number of new cases in over a fortnight while the mortality rate fell for a fourth consecutive day and Italy continues to see a downturn on new cases and daily deaths. With focus now shifting to the US as the new epicenter, President Trump promised Americans there is light at the end of the tunnel, as social distancing measures appear to be slowing the pace of community transmission. Having remained largely range bound for much of the domestic session, bouncing between 0.5850 and 0.5890 the NZD crept higher overnight breaking through 0.59 and touching highs at 0.5963.

While broader direction continues to be driven by risk demand the RBNZ’s announcement it would being purchasing bonds issued by Local Government Funding Agencies has helped fostered improved confidence across domestic financial markets. The move toward non-government bonds has been designed to work along side stimulatory measures and help shore up financial conditions. While the pandemic continues to drive uncertainty, such measures acts as cushion and protect the domestic economy against a full-scale collapse. With the NZD widely considered to be undervalued, the framework for a recovery in a post COVID19 environment is forming.

Key Movers

Safe Havens suffered through trade on Monday as improvements in risk sentiment helped bolster demand for risk assets and commodity currencies. Despite a correction in Oil prices the Norwegian Kroner lead majors advancing across the board while the USD, CHF and JPY all fell and the Euro struggled to make any meaningful move in either direction.

The dollar index fell 0.1% while the JPY and CHF fell 0.5 and 0.1 respectively. Sterling also struggled, dipping back below 1.22 after reports UK prime minister Boris Johnson had been moved to intensive care as a precaution were confirmed. Having been hospitalized over the weekend Johnson’s symptoms seemingly worsened, creating concern among markets as to who will guide the country amidst this chaos if Johnson is impaired for an extended period of time.

Attentions today remain squarely affixed to the evolving pandemic with fluctuating risk demand governing direction. Boris Johnson’s condition serves as a reminder of the indiscriminate nature of this virus and the risks it still pose.

Expected Ranges

NZD/USD: 0.5790 - 0.6030 ▲

NZD/EUR: 0.5390 - 0.5550 ▲

GBP/NZD: 2.0280 - 2.1020 ▼

NZD/AUD: 0.9680 - 0.9820 ▼

NZD/CAD: 0.8280 - 0.8450 ▲