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Kiwi under pressure after mixed Financial Stability Report

NZD - New Zealand Dollar

The New Zealand Dollar oscillated wildly at the start of Wednesday as the Financial Stability Report flashed mixed signals. Initially, the Kiwi traded higher after the release of the Financial Stability Report as the RBNZ decided not to signal any changes to loan to Value ratio setting. This was short lived however after the market took into account the systemic risks outlined by the report and the particular note of the need for some insurers and non-bank deposit takers to improve their capital buffer. Opening this morning at 0.6542, the Kiwi was already under pressure from the risk-off sentiment pervading markets as the world digested the eurozone election results and an escalation in the US-China trade war.

Besides the events this morning the Kiwi looks forward to a speech from RBNZ governor Adrian Orr for direction ahead of the annual budget release tomorrow.

Key Movers

The Euro continued its downward trajectory overnight, drifting lower as the Greenback continued to strengthen. Aided by the risk-off sentiment pervading global markets, the US Dollar managed to make inroads against the at-risk Euro. Opening this morning at 1.1165, the Euro continues to come under pressure as the election results sink in and the Trade war continues. The rise of Eurosceptics dented confidence in the Eurozone which has seen the Euro drift lower throughout the week. Adding to the Euro’s woes are concerns of an escalation in the US-China trade war with China reportedly contemplating restricting rare-earth exports to the US. Rare-Earth, a crucial component in a number of advanced technology products is primarily sourced from China, who hold around 71% of the worlds supply. Overall, the Euro shed 0.28% on Tuesday.

The Great British Pound also remains weak with political uncertainty dampening the Sterling’s prospects. Opening this morning at 1.2655, the Sterling faced a number of headwinds on Tuesday. As expected, British traders returned to work on Tuesday after the public holiday on Monday to find the disappointing news of the Brexit’s party’s victory in the European election. The Pound dipped lower on the headline although was slightly supported by reports that Jeremy Corbyn, the Labour party leader intends to back a second Brexit referendum. Adding to the risk-off sentiment was the news of an escalation between the US and China with the uncertainty of a resolution playing havoc with risk appetites globally.

Expected Ranges

NZD/AUD: 0.9412 - 0.9498 ▼

NZD/CAD: 0.8787 - 0.8867 ▼

NZD/EUR: 0.5822 - 0.5898 ▼

NZD/GBP: 0.5129 - 0.5201 ▲

NZD/USD: 0.6502 - 0.6599 ▼