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Kiwi holds onto gains as attentions turn to FOMC for potential monetary policy divergence

NZD - New Zealand Dollar

The New Zealand dollar offered little to excite investors through trade on Monday bouncing amid a 20-point range between 0.6391 and 0.6410. The NZD remains elevated, holding onto gains enjoyed in the wake of last weeks surprise RBNZ policy decision as Services and Manufacturing PMI data showed strong expansion and underpinned the Boards decision.

With the Central Bank policy meeting behind us we expect short term volatility to subside through the coming days with the NZD supported on moved below 0.64 and approaching 0.6380. While upside gains will be hard won, guidance from the RBNZ signals little appetite for further rate cuts in the near term with Governor Orr maintaining conditions are already “very accommodative” helping underpin any downside moves.

With little of note on the domestic docket attentions turn to Wednesday FOMC meeting minutes. Any sign the Fed is open to loosening US monetary policy could afford a second boost to the NZD as a divergence in monetary policy platforms emerges.

Key Movers

The US dollar edged marginally lower against both the Euro and Japanese yen on Monday as investors looked to diversify assets and shift toward haven currencies as reports intimate phase one of a US/China trade deal may be waylaid. China is looking for assurances the US will roll back tariffs prior to December 15th when the next round of Tariffs on Chinese goods are scheduled to take effect. The USD fell back below 109 against the Yen, while the Euro jumped through 1.1050. The upturn in the single currency marks a 2 cent recovery from two year lows touched in early October, as optimism a trade deal will be struck have revived expectations for growth leading into 2020.That said, for the Euro to maintain any long term upturn key underlying indicators will need to point to improved and sustainable economic growth.

Sterling held above 1.30 through trade on Monday as the conservatives maintain a lead in the polls, bolstering expectations Boris Johnson will collect the majority needed to force through his Brexit withdrawal agreement. Attentions remain squarely affixed to election developments in shaping short term GBP direction.

Expected Ranges

NZD/USD: 0.6380 - 0.6430 ▼

NZD/EUR: 0.5750 - 0.5810 ▼

GBP/NZD: 2.0120 - 2.0330 ▲

NZD/AUD: 0.9380 - 0.9430 ▲

NZD/CAD: 0.8410 - 0.8480 ▼