Daily Currency Update

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Kiwi flat despite improved risk sentiment. When will we see a break from underperformance?

NZD - New Zealand Dollar

The New Zealand dollar remained largely flat through trade on Monday bouncing between 0.6620 and 0.6655 in the absence of headline domestic data points. Despite an uptick in risk appetite and softness across haven assets, investors appeared reluctant to extend Kiwi upside ahead of a key market data prints, headlined by domestic business confidence data Tuesday. Improvements across NZ domestic data points and softness across key US indicators could help fuel Kiwi upside, break an extended period of underperformance and drive an advance to some fair value estimates nearer 0.68. That said, our immediate attentions turn to the ANZ’s domestic business confidence report and Trade Weighted Index, key US data sets and the signing of phase 1 in the US/China trade agreement. While medium term forecast suggest an upturn is possible our short term outlook and modelling suggests a consolidation of current handles with a bias to NZD downside. Watch supports at 0.6620 and 0.6580 with upside resistance on moves approaching 0.67.

Key Movers

The USD edged upward through trade on Monday, recouping losses suffered in the wake of Friday’s disappointing labour market data and a decline in wage growth that fuelled expectations a Fed Rate cut will be proffered through the latter half of the year. Monday’s advances comes as investors prepare for a heavy week of domestic data points, headlined by CPI inflation data Tuesday and Core Retail Sales data Thursday. Softness across these data points will affirm suggestions the US economy is shifting nearer recession and subsequently increase the likelihood monetary policy amendments will be required at some point through 2020.

The Great British pound was the days worst performer Monday, falling half a percent and slipping further below 1.30 when valued against the USD. A raft of macroeconomic data sets showed the UK economy grew at its slowest pace in more than seven years and follows comments from the Bank of England that suggest a rate cut could be issued in the weeks ahead. As the likelihood of monetary policy corrections increases sterling will remain under pressure. Having already fallen 2% in the first two weeks of 2020 we will continue to monitor data points ahead of the January BoE meeting for any indication a rate hike is imminent.

Expected Ranges

NZD/USD: 0.6580 - 0.6720 ▼

NZD/EUR: 0.5880 - 0.5980 ▼

GBP/NZD: 1.9430 - 1.9780 ▼

NZD/AUD: 0.9530 - 0.9630 ▼

NZD/CAD: 0.8620 - 0.8720 ▼