Daily Currency Update

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Kiwi edges lower as business confidence continues to falter

NZD - New Zealand Dollar

The New Zealand dollar fell through trade on Tuesday, slipping toward 0.66 and touching intraday lows at 0.6603. The NZD has been the weakest performing currency among developed economies through the last 24 hours as investors reacted to sustained weakness across business sectors and a consistent downturn in broader business confidence. While there were some signs confidence is improving key investment indicators remain near their lowest levels in over a decade suggesting that despite improved employment prospects business are still reluctant to extend or leverage positions a push for growth in the current environment.

With little of note on today’s domestic docket attentions now turn to the US/China trade deal as a marker guiding broader risk sentiment while Friday’s inflation report will provide a crucial barometer on domestic price pressure and possible RBNZ policy action. At this point we expect the RBNZ to maintain the current cash rate throughout 2020 but any softening in inflation, GDP or labour market conditions could force additional monetary policy evening forcing the NZD away from upside fair value estimates and prolong this period of sustained underperformance.

Key Movers

The Great British Pound found support through trade on Tuesday, bouncing back through 1.30 as investors looked to moderate recent losses. Sterling has come under increasing pressure through since the December election as the focus shifts again towards Brexit and a stagnating domestic economy. As the likelihood of a rate cut looms ever larger analysts have begun to reprice GBP forcing it toward 7 weeks lows earlier this week. While we anticipate the pound will remain under pressure through the coming months our immediate attentions turn to Today’s CPI inflation report and commentary from Bank of England and MPC policy member Michael Saunders for further direction. With other policy members already suggesting a rate cut is imminent a poor inflation print and dovish commentary from Saunders could force the Pound lower still. Initial supports at 1.2950 remain in play with extended downside toward and through 1.29 and 1.2850 possible through the day if money markets amplify rate bet expectations.

The Yen advanced through trade on Tuesday, recouping losses suffered through the end of last week as risk sentiment soured following report the US will not reduce tariff’s on China before the 2020 Presidential Election. The commentary has doused recent optimism that today’s signing of a Phase 1 trade deal would be the beginning of a full-scale de-escalation in trade tensions.

Expected Ranges

NZD/USD: 0.6550 - 0.6680 ▼

NZD/EUR: 0.5890 - 0.5980 ▼

GBP/NZD: 1.9520 - 1.9890 ▲

NZD/AUD: 0.9540 - 0.9630 ▼

NZD/CAD: 0.8580 - 0.8680 ▼