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Kiwi steadies after RBNZ rate cut

NZD - New Zealand Dollar

The New Zealand Dollar edged higher through trade on Thursday creeping back toward 0.66 US cents as markets adjust USD holdings amid expectations U.S/China trade hostilities will extend into the second half of the year. With a risk off mood permeating markets NZD upside was limited and the potential for an extension through and beyond 0.66 depends largely on the outcome of trade discussions.

The NZD has suffered a sustained push to the downside throughout the last 8 weeks amid speculation the RBNZ would lower the Overnight Cash Rate (OCR). The decision to pull the trigger on Wednesday while fostering a shot term sell off appears to have placed a floor beneath the NZD as markets conviction the RBNZ will cut again in the coming months has reduced. With fair value estimates still at or nearer 0.67 there is some scope for an upturn if risk appetite is revived.

Attentions today turn to US/China trade talks. As the likelihood a deal will be brokered fades attentions turn to the implementation of increased tariffs and what this means for the global trade narrative.

Key Movers

US/China trade talks have dominated direction through the week and will drive markets into weekend as trade delegate meet again today in a bid to negotiate an 11th hour compromise. Optimism a deal would be struck has faded this week fostering a risk off mood that has dampened demand for the USD, commodity led and emerging market units. The USD has fallen across the board as markets looked to the longer-term impacts of an increase in the current tariff platform. Given the increase to tariffs will apply to goods leaving china from today there is a small window of extended negotiation open as goods make there way to the US. Failure to reach a deal could dampen market expectations for US growth and sap some of the recent USD upside.

Expected Ranges

NZD/USD: 0.6530 - 0.6630 ▲

NZD/EUR: 0.5830 - 0.5930 ▼

GBP/NZD: 1.9630 - 1.9830 ▼

NZD/AUD: 0.9390 - 0.9480 ▲

NZD/CAD: 0.8850 - 0.8930 ▲