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Kiwi pairs losses despite comments from RBNZ Deputy Bascand

NZD - New Zealand Dollar

The New Zealand dollar remained below the 63 US cent handle on Wednesday despite an initial rally following the release of CPI figures for the third quarter of 2019. Opening at 0.6283 an initial push to intraday highs of 0.6315 were seen as the Consumer Price Index increased to 0.7% in the September quarter and 1.5% on an annualised basis. The index increase was supported by a rise in the price of food along with housing and household utilities.

The local currency dropped in the afternoon following remarks from RBNZ Deputy Governor Geoff Bascand that it was more than likely that there will be further stimulus to interest rates in the future with unconventional policies if required. Markets have fully priced in another cut of 25bps at the RBNZ policy meeting on November 13th.

Despite overnight lows reaching 0.6240, the NZD/USD cross paired all losses following disappointing retail sales in the United States causing a drop in the greenback.

The New Zealand dollar opens this morning at 0.6289. We expect support levels to hold on moves approaching 0.6240, while any upward push will likely meet resistance at 0.6320.

Key Movers

The US dollar saw a deterioration overnight as Retail Sales saw its first drop in seven months. A reading of -0.3% for the month of September grossly missed market expectations of an increase of 0.3% as interest rate cuts in the United States have yet filtered through to consumer spending.

Should economic indicators continue to show weakness you would expect the Federal Reserve to cut rates for a third consecutive meeting on October 30th. Markets quickly increased their expectations of a 25bps cut following the Retail Sales release from 73.8% to 87.1% based on the CME Fedwatch Tool. The US Dollar Index (DXY) which measures the greenback against a basket of currencies closed 0.3% lower to test the 98.00.

Cable continued its rally overnight in hopes of a Brexit deal as talks between UK and EU officials resumed in Brussels. With the deadline of October 31 quickly approaching, the Great British Pound saw heightened volatility not seen since the 2016 June referendum. GBP/USD hit a five-month high overnight of 1.2877 with markets hanging onto any news as negotiators enter into their final days of talks.

Today we see employment figures due for release this morning in Australia and UK Retail Sales is likely to get some attention this evening. Brexit discussions continue to be the main theme at this weeks EU summit.

Expected Ranges

NZD/USD: 0.6240 - 0.6320 ▼

NZD/AUD: 0.9260 - 0.9340 ▼

GBP/NZD: 2.0200 - 2.0600 ▲

NZD/EUR: 0.5620 - 0.5720 ▼

NZD/CAD: 0.8260 - 0.8350 ▼