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Kiwi drifts lower ahead of Annual Budget Release

NZD - New Zealand Dollar

The New Zealand dollar was sold off on Wednesday afternoon after opening at 0.6540. Despite a mixed financial stability report release, RBNZ Governor Orr held a press conference shortly after stating that the recent interest rate cut to 1.5% is still working its way through the economy.

The decline of the local currency followed shortly after a bearish ANZ Business Confidence release with 32% of respondents reporting they expect general business conditions to deteriorate in the year ahead. Despite a lift of 6 points from the previous month it was not enough to support the Kiwi as it moved to intraday lows of 0.6505 in a risk off environment overnight.

From a technical perspective, the Kiwi currently trading at 0.6512 with a focus domestically on the Annual Budget Release. We continue to expect support to hold on moves approaching 0.6480 while now any upward push will likely meet resistance at 0.6560.

Key Movers

Risk off sentiment favoured safe-haven currencies such as the USD and JPY, both rallying in overnight movements. The US Dollar Index (DXY) which measures a basket of currencies against the greenback charged through 98.00 to retest previous 2019 highs back on April 26th. After bottoming out at 97.55 on Tuesday the DXY reached overnight highs of 98.21.

With no end in sight for escalating trade wars between the Unites States and China, Gold was also a winner seeing a 0.2% rise on spot prices. 10-year treasury notes hit 20-month lows with speculation rising that the Federal reverse will need to cut rates at least once this year with markets currently pricing an 85% chance by October this year.

Political uncertainty in Great Britain continues to hamper the Pound as cable remained under pressure overnight. With increased liquidity from the return of traders following a UK Public holiday this week, GBP/USD dropped to 1.2614 and a retest of 2019 lows on May 23rd.

Currency markets are expected to move off Prelim GDP figures due to release this evening with a keen eye on Chinese manufacturing data scheduled on Friday.

Expected Ranges

NZD/USD: 0.6480 - 0.6550 ▼

NZD/EUR: 0.5800 - 0.5900 ▼

NZD/AUD: 0.9350 - 0.9460 ▼

GBP/NZD: 1.9200 - 1.9600 ▲

NZD/CAD: 0.8750 - 0.8850 ▼