Daily Currency Update

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Kiwi outperforms as risk appetite improves

NZD - New Zealand Dollar

The New Zealand dollar outperformed on Thursday bouncing off 0.6250 to push back through 0.63 as risk appetite improved on expectations the Fed will need to loosen monetary policy and maintain an accommodative economic environment. Having touched 4-year lows earlier in the week the NZD followed emerging markets higher and outperformed nearly all major counterparts.

Despite the upturn and rush to adjust short positions yesterday the Kiwi remains vulnerable to ongoing risk appetite fluctuations. Resistant remains in tact on moves approaching 0.6350 as our attentions turn to US non-farm payrolls and Fed commentary for more direction. A string of softer US data sets point to a downside risk in NFP estimates and could prompt further USD weakness into the weekly close.

Key Movers

The US dollar fell against most major counterparts through trade on Thursday as services data missed broader estimates. The soft read compounded weakness in manufacturing data on Wednesday and pointed too a broader slowdown in the labour market ahead of tonight’s non-farm payroll print. Average estimates have the US economy adding 145,000 new employment opportunities in September, however recent weakness across ISM surveys opens the door to increased downside risk. A miss could prompt the Fed to review its wait and see approach and force another cut before the end of the year. Current estimates have priced in at least another 25 basis point cut in October or December.

The Great British Pound jumped through trade on Thursday, advancing 0.5% to touch 1.2415. Sterling found support in a softer USD and a slight reduction in the probability the UK will leave the EU without a deal in Place. As we draw closer to the October 31 deadline Johnson may be forced to accept a compromise on the Irish backstop proposal if he is to breakdown the frosty reception, he has encountered from EU leaders. We expect Sterling will remain range bound leading through October fluctuating in response to Brexit headlines.

Expected Ranges

NZD/USD: 0.6220 - 0.6380 ▲

NZD/EUR: 0.5710 - 0.5790 ▲

GBP/NZD: 1.9430 - 1.9730 ▼

NZD/AUD: 0.9320 - 0.9380 ▲

NZD/CAD: 0.8330 - 0.8480 ▲