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NZD in a holding-pattern ahead of FOMC

NZD - New Zealand Dollar

NZD/USD traded in a holding-pattern hitting a low of 0.6339 during the European session, before gaining some ground in the NY session to touch a high of 0.6362, in line with the AUD and other risk currencies. The kiwi is starting the Asian session this morning around 0.6355. It is likely to remain a fairly subdued day as markets remain cautious ahead of tonight’s FOMC meeting, unless there are any surprises in the Australian CPI data. Implied probability of a 25-basis point cut on November 13th has dropped from 80.4% to 74.3% on the back of RBNZ Assistant Gov Hawkesby speech released yesterday, discussing the RBNZ 50-basis point cut surprise in August. Seems like investors are reducing their bets on the RBNZ cutting rates next month.

Key Movers

The New York session was one of consolidation with the US Dollar Index flat, S&P down -0.08% and the US 10 year Treasury closing at 1.8385% (after touching a monthly high at 1.8580%), ahead of tonight’s important FOMC meeting. Implied probability of a 25-basis point cut sits at 94%, almost a certainty, but investors will be watching closely what Jerome Powell has to say on forward rate guidance and the divide among FOMC members. The Brexit headlines continued overnight with UK parliament voting overwhelmingly (438-20) to have a general election on December 12th. The bill will need to go to the House of Lords before getting its Royal Assent on Thursday. Its expected that there is to be minimal disruption in the Upper House. Interesting to note that many of the Ministers abstained, signaling reluctance amongst the vote. GBP/USD was fairly volatile overnight touching lows of 1.2807 before spiking 0.77% to a high of 1.2905 as the Labour Party announced it would back the election. It is now sitting around 1.2865.

Expected Ranges

NZD/USD: 0.6335 -0.6370 ▲

NZD/EUR: 0.5710 - 0.5745 ▲

GBP/NZD: 2.0190 - 2.0315 ▼

NZD/AUD: 0.9235 - 0.9305 ▼

NZD/CAD: 0.8290 - 0.8340 ▼