Daily Currency Update

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Kiwi test resistance as trade talks bolster appetite for risk

NZD - New Zealand Dollar

The New Zealand dollar followed the Yuan higher through trade on Thursday, buoyed by optimism surrounding US-China trade talks. Having maintained a tight range through much of the week the NZD extended beyond recent short-term bounds pushing above 0.63 and 0.6320 to touch 0.6335.

With little of note on the domestic docket direction moving into the weekend will be governed solely by trade headlines. While a mini deal should help extend Thursday’s upturn and amplify the recent risk on move a break down in talks will likely have a larger impact. Any leak suggesting talks have again stalled will force the Kiwi back below 0.63 and likely test support at 0.6290 and possibly decade lows at 0.6210. That said we expect a relatively quiet session with talks due to extend beyond Friday’s close. In the absence of a leak we anticipate recent ranges to be upheld opening the door to volatility in open next week as investors absorb headline news and respond to statements issued in the wake of talks.

Key Movers

Safe havens wore the brunt of yesterdays risk on moves with the CHF and JPY both suffering losses against major currency counterparts. The USD touched one-week highs against the Yen on Thursday as hopes for a partial trade deal between the US-China drove an upturn in risk appetite. While currency markets were perhaps less sensitive than equity markets there is plenty of scope for volatility leading into next weeks open as trade talks progress through Friday.

Sterling recouped losses suffered through trade on Wednesday erasing the dip suffered after the Northern Irish Party emphatically opposed concessions on the Irish backstop. Prime Minister Johnson and Irish Premier Varadkar issued a joint statement suggesting a pathway to a deal was possible. The turn around in optimism helped the pound surge back through 1.24 and 1.2450 to touch 1.2470.

Expected Ranges

NZD/USD: 0.6290 - 0.6370 ▲

NZD/EUR: 0.5710 - 0.5780 ▲

GBP/NZD: 1.9300 - 1.9880 ▲

NZD/AUD: 0.9300 -0.9400 ▼

NZD/CAD: 0.8350 - 0.8450 ▲