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US/China trade and political tensions force flight to safety

NZD - New Zealand Dollar

The New Zealand dollar trended lower through trade on Wednesday edging back toward 0.64 US cents as market and risk sentiment wavered. Having touched intraday highs at 0.6435 the NZD lost 20 points as the US Senate passed a bill supporting Hong Kong, fuelling tensions between the US and China and casting a pall over recent trade optimism. The passage of the Bill provoked a strong response from China and fostered a general level of nervousness across markets and asset classes.

With little of note on today’s macroeconomic calendar we expect direction to be driven by the ongoing stream of trade commentary as tariff talks drive demand for risk. We expect the NZD will continue to meet resistance on moves approaching 0.6450 with buying strong opportunities propping up moves toward and below 0.64 in the near term.

Key Movers

Sterling edged ever slightly lower in the wake of the UK electoral debate with Labour’s Jeremy Corbyn proffering a stronger showing than many expected. While the debate result has had little impact on broader election expectations sterling slipped below 1.2900, while marking a new one-week lows against the Euro. We continue to watch headline developments for any shift in polling momentum.

The US dollar advanced against most major counterparts as trade and political tensions threaten to force phase one of the US/China trade deal into 2020. China’s push for a tariff roll back and sustained pressure from the White House to meet its own demands have created a road block, forestalling recent negotiations and increasing the likelihood a new stage of tariffs will be implemented in December. Spurred by souring demand for risk and a push to haven assets the US dollar gathered upward momentum forcing the Euro back toward 1.1050 and jumping through 108.50 against the Japanese Yen.

Expected Ranges

NZD/USD: 0.6380 - 0.6450 ▼

NZD/EUR: 0.5720 - 0.5810 ▼

GBP/NZD: 1.9980 - 2.0280 ▲

NZD/AUD: 0.9390 - 0.9480 ▲

NZD/CAD: 0.8510 - 0.8580 ▲