Daily Currency Update

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Kiwi holds its ground amidst retreat in global risk sentiment

NZD - New Zealand Dollar

The New Zealand Dollar opens unchanged from yesterday morning at 0.6741 despite a 20-pip surge mid-way through yesterdays session. With very little on the domestic docket to drive direction the Kiwi took its cues from off-shore but ultimately remained well and truly range-bound. There was some positive news across the New Zealand market however with NZ rates climbing 2bps to 3bps across the yield curve although this could potentially become undone today. The market has also now priced in a 40% chance of a rate cut in May by the RBNZ. In the end however, the Kiwi moved to the rhythm of global risk sentiments which saw a significant retreat after the IMF downgrading their global growth outlook from 3.5% to 3.3%, its lowest level since the global financial crisis. The US Dollar also came under buying pressure after Trump announced his intentions to raise $11B worth of tariffs against the under-pressure European Union which saw a wholesale sell-off in US equity markets.

Wednesday looks to be another quiet day on the domestic docket in New Zealand with direction again to be driven by offshore forces. The global calendar however is set to enjoy a much busier session with the ECB meeting and the EU summit kicking things off followed by US CPI and the FOMC minutes.

Key Movers

Market sentiment dominated currency movements overnight with the Japanese Yen the best performer, although movements have been modest. Headlines from the United States drove the retreat in risk sentiment with the IMF starting the decline early in the American session. The IMF cut its forecast for global growth from 3.5% to 3.3% in what it describes as a “delicate moment” for global economies. The IMF also cited a number of downside risks and the need for policymakers to be careful and considered to avoid any missteps. On the trade front, US President Donald Trump also tweeted his intention to impose $11b worth of Tariffs on EU imports in retaliation for subsidies for Airbus. US equity markets reeled on the news, pulling back significantly. Bond markets also retreated although relatively marginally.

Besides the Yen, the only other fluctuation of note was the Great British Pound which declined 0.2% ahead of the EU summit. The EU looks likely to reject Theresa May’s request for a short-term extension to the 30th of June and instead propose a longer extensions with certain conditions built in. The result will likely be significant headwinds to the Sterling until a soft Brexit option comes into better view.

Wednesday looks to be an eventful day for global economies with the EU summit and ECB meeting kicking things off in the European session. The US will also release their CPI figures and FOMC minutes later in the day with US CPI in particular of key focus for global markets.

Expected Ranges

NZD/AUD: 0.9425 - 0.9499 ▼

GBP/NZD: 1.9275 - 1.9415 ▲

NZD/USD: 0.6705 - 0.6789 ▼

NZD/EUR: 0.5953 - 0.6016 ▼

NZD/CAD: 0.8952 - 0.9032 ▼