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Kiwi finds support after week-long barrage

NZD - New Zealand Dollar

The NZD followed the AUD and commodity currencies higher through trade on Friday, bouncing off year to date lows at 0.6593 to push back above 0.6650. Softer than expected US inflation data and a broad-based bout of US profit taking allowed the NZD to bounce off lows not seen since November One 2018.

Despite the uptick the NZD continues to suffer from investors shorting the commodity led unit in the wake of the RBNZ’s dovish shift. Since the central bank changed its policy position at its March meeting the NZD has plunged from 0.6920 to ANZAC day lows 0.6593 with short positions now at their highest level in nearly 5 months. While there is some argument the Kiwi has been oversold and fair value sits nearer 0.67 – 0.69 investors will need to see a recovery in domestic economic fortunes before rushing to unwind the current downtrend.

Attentions this week turn to Wednesday’s employment print.

Key Movers

The US dollar upturn stalled on Friday despite a stronger than anticipated first Quarter GDP print. The economy grew at a much quicker pace than analysts expected, growing at 3.2% in the three months to March 31st. The strong read however was overshadowed by softness across key inflation indicators. The PCE index showed price pressures remain stagnant, leaving little incentive for the FOMC to shift away from a cautious and dovish bias. Despite the softness across inflation there are still signs the US economic growth story will continue through Q2.

Sterling suffered its worst weekly performance for April last week as Brexit talks stalled and the US dollar rebound continued. Despite some relief Friday, the Pound appears stuck toward the lower end of recent ranges, struggling to break back toward 1.32-1.33. With little signs Theresa May is making progress with lawmakers to advance her Brexit agenda we anticipate Sterling will remain range bound, testing moves toward 1.2850.

Expected Ranges

NZD/USD: 0.6580 - 0.6720 ▲

NZD/EUR: 0.5880 - 0.6020 ▲

GBP/NZD: 1.9280 - 1.9520 ▼

NZD/AUD: 0.9380 - 0.9505 ▲

NZD/CAD: 0.8860 - 0.8980 ▲