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Kiwi, last weeks worst performer. All eyes now turn to the RBNZ

NZD - New Zealand Dollar

The New Zealand dollar closed the week the worst performer among G10 currencies, dragged down by its Antipodean counterpart and souring trade talks. The NZD suffered a steady decline through trade last week, driven toward 4-year lows at 0.6255 as speculative selling drove the currency lower and soured trade negotiations compounded the move.

The NZD suffered at the hands of broader AUD softness following dovish RBA minutes and weaker labour market performance. Investors saw AUD softness as a precursor to further RBA rate cuts and a belief the RBNZ may well lead out and cut rates this week. However, having cut rates in September the broad consensus is for the RBNZ to maintain the current policy setting and deliver a measured and dovish assessment of current economic conditions. Given the recent speculative sell off a hawkish surprise or understated dovish review opens the door to an NZD bounce and move back toward 0.63 and 0.6350.

Attentions this week remain squarely affixed to this week’s RBNZ rate announcement with broader direction driven by trade and risk appetite.

Key Movers

Last week’s hawkish rate cut from the Federal reserve, disappointed markets and offered a stark contrast with the policies proffered by other major banks. The FOMC is alone its decision to cut rates as a means of maintaining robust economic growth. Its counterparts face a path of increasingly loose monetary policy as a means of stimulating stagnant economic conditions. These contrasting policy outlooks have helped add a floor below the USD when compared with major counterparts and we expect the EUR to maintain its slow march downward as markets begin to absorb the ECB latest policy offering, testing 1.10 and 1.0950, while Sterling’s fortunes remain squarely affixed to the Brexit process and the JPY continues to fluctuate on the back of broader risk trends.

Attentions this week turn to US inflation data, European Manufacturing and services data and commentary from ECB president Draghi and BoE head Mark Carney and an FOMC press conference; we expect broader ranges will remain unchanged.

Expected Ranges

NZD/USD: 0.6250 - 0.6350 ▼

NZD/EUR: 0.5830 - 0.5930 ▼

GBP/NZD: 1.9630 - 2.030 ▲

NZD/AUD: 0.9200 - 0.9300 ▼

NZD/CAD: 0.8280 - 0.8400 ▼