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Kiwi range bound as contagion shows little sign of abating

NZD - New Zealand Dollar

The New Zealand dollar traded within a tight range throughout Monday bouncing between support at 0.6455 and resistance at 0.6475. Despite the promise of monetary policy stimulus and a late rebound in Offshore Yuan the NZD failed to ride the upswing in market sentiment higher. Despite proactive moves from Chinese health and economic officials the state of the coronavirus remains largely unchanged, with the death toll now over 350, and little signs of a vaccine or change in the spread of the contagion.

With little of note on the days domestic macroeconomic docket, attentions remain squarely affixed to wider market sentiment and developments in China ahead of tomorrow’s employment change and unemployment rate reports. Watch supports at 0.6450 with a consolidated break possibly signalling another shift lower.

Key Movers

The US Dollar advanced through trade on Monday, recouping losses suffered against safe haven counterparts, the Yen and Swiss Franc, as tensions over the economic impact of the coronavirus eased and domestic manufacturing data showed a surprise uptick through January. Advancing three tenths of one percent against both haven assets the dollar also forced the Euro back below 1.1050 while the Great British Pound suffered a heavy sell off as fears a hard break from Europe was still in play. Advancing 0.4% the dollar index opens this morning at 97.84

The Great British Pound lost 200 points through trade on Monday and was the worst performer when compared with its major counterparts. Fears Britain would fail to secure a favourable trade deal with Europe in before the end of the 11 month transition period escalated on Monday after Prime Minister Johnson adopted a tough and hard lined tone when laying out his plan for future relations. Falling through 1.31 and 1.30 Sterling opens this morning at 1.2990. Attentions now remain squarely affixed to trade discussion with headline updates expected to drive direction as investors and businesses try to position themselves.

The Chinese Yuan touched seven-week lows through early trade on Monday before pairing losses and recouping some lost ground as investors and markets found a renewed appetite for risk. Efforts from Chinese health officials to Contain the virus and moves from the Peoples Bank of China to stabilise the economy and minimise the expected economic impact bolstered market sentiment. Having lowered interest rates on reverse purchase agreements and promised to implement a variety of monetary policy tools to ensure the economy remains liquid China’s Central Bank has actively eased market concerns. That said the state of the virus and the spread of the contagion remains unchanged and until a vaccine is available or the virus is contained we expect market sentiment will continue to see saw.

Expected Ranges

NZD/USD: 0.6410 - 0.6530 ▼

NZD/EUR: 0.5790 - 0.5880 ▲

GBP/NZD: 1.9780 - 2.0480 ▼

NZD/AUD: 0.9590 - 0.9720 ▼

NZD/CAD: 0.8520 - 0.8620 ▲