Daily Currency Update

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Kiwi shifts sharply lower, inexplicably moving against the grain

NZD - New Zealand Dollar

The New Zealand dollar shifted lower on Friday, moving against conventional trends and an uptick in the CNY. Despite improved trade rhetoric and a reduction in trade tensions the NZD slipped back below 0.64 US cents, giving up 80 points in a relatively sharp drive off mid-week highs at 0.6445. While commodity currencies drifted lower the significant under performance of the NZD is largely inexplicable. The correction against the USD also fostered steep declines against key crosses as the AUD pushed toward 1.08.

Attentions this morning will be focused on oil, with prices expected to jump sharply after the weekends drone strike on Saudi Arabian production facilities. The hit is expected to cut the country’s output by 50% adding significant strain on the world’s oil supply reducing the global refining capacity by close to 6%. Oil prices are expected to jump sharply higher and a protracted period of higher prices will further damage global growth prospects, adding further downside pressure on long term NZD performance.

Key Movers

The Great British pound continues its headline risk vulnerability, advancing through trade on Friday after reports Northern Irelands largest political party had agreed to accept European rules post Brexit, prompting a surge of optimism a resolution to Irish backstop concerns can be found. Sterling surged toward 1.25 and near two-month highs as investors looked to correct short positions.

Attentions remain squarely affixed to headline risk events as the likelihood of a no deal Brexit has been significantly reduced.

The US Federal Reserve remains in focus this week with the FOMC expected to cut rates on Wednesday. With a large swathe of the market already pricing in a 25 basis point cut our focus turns to the accompanying rate statement and commentary. The promise or lack thereof of additional rate cuts will drive direction.

Expected Ranges

NZD/USD: 0.6320 - 0.6450 ▼

NZD/EUR: 0.5680 - 0.5800 ▼

GBP/NZD: 1.9200 - 1.9850 ▲

NZD/AUD: 0.9240 - 0.9330 ▼

NZD/CAD: 0.8415 - 0.8520 ▼