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Kiwi edges upward as market fears surrounding coronavirus ease

NZD - New Zealand Dollar

The New Zealand dollar edged marginally higher through trade on Tuesday, buoyed by improved appetite for risk and easing concerns surrounding the impact of the coronavirus. While there has been little change in the state of the virus, markets fears have dissipated following increased measures within China and globally to contain the outbreak. Having edged up to 0.6490 investors largely shrugged off a downturn in dairy prices, with much of the market pricing in a downturn prior to the release as investors already priced in a decline in demand for New Zealand’s key commodity asset as the coronavirus dampens China’s demand.

Attentions today turn to domestic unemployment data as a marker to RBNZ policy makers. While we anticipate the unemployment rate will remain steady at 4.2% and wage growth is expected to remain strong a miss in numbers may add pressure on the RBNZ to add to its recent easing bias. We expect the currency to remain largely range bound struggling to extend gains beyond 0.65 with supports in play at 0.6450/30.

Key Movers

Safe haven’s underperformed through trade on Tuesday as demand for risk improved following reduced fears surrounding the economic and market impact of the coronavirus. The Yen and Swiss Franc retreated for the 2nd consecutive day as measures from Chinese and Global health officials to contain the outbreak seemingly dampened broader fears. The USD advanced against the Yen up seven tenths of one percent, while the Swiss Franc fell 0.3% as the People’s Bank of China continued to pump funds into the economy in a bid to maintain economic liquidity and stabilise the market.

Attentions remain with coronavirus updates while US domestic politics takes centre stage. Results in the Iowa democratic caucus are expected to filter through today with a win for Bernie Sanders or Elizabeth Warren could hurt shares and foster a shift toward safe haven currencies.

The Great British Pound recouped some of the weeks earlier losses following stronger than expected construction data. The surprise uptick offset recent fears of a hard Brexit and helped propel Sterling back through 1.30. Attentions remain with Brexit trade talks as the primary driver governing Sterling direction. As long as the EU and UK continue to clash over the structure off a post Brexit trade deal we expect both the GBP and Euro to experience headline volatility with support on moves below 1.2950/1.29 and resistance on extensions toward 1.3180/1.32.

Expected Ranges

NZD/USD: 0.6450 - 0.6530 ▲

NZD/EUR: 0.5830 - 0.5910 ▲

GBP/NZD: 1.9880 - 2.0230 ▼

NZD/AUD: 0.9570 - 0.9660 ▼

NZD/CAD: 0.8570 - 0.8650 ▲