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Kiwi’s shallow upturn falters in face of stronger US data sets

NZD - New Zealand Dollar

The New Zealand dollar edged lower through trade on Thursday, having failed to take advantage of a renewed demand for risk. Domestic markets were closed in observance of Waitangi Day meaning direction was solely driven by offshore stimuli leaving the NZD vulnerable to a broader USD upturn. The dollar index advanced and consolidated moves above 98 as unemployment claims printed below broader expectations fostering expectations for a strong non-farm payroll print Friday.

Having touched intraday lows at 0.6454 attentions now turn to quarterly inflation expectations. A strong print alleviates pressure on the RBNZ to cut interest rates to 0.5% and could foster a shallow uptick back toward 0.65, while a miss amplifies calls for additional monetary policy stimulus and will add further downward pressure on the underperforming NZD.

Key Movers

The Great British Pound extended losses through trade on Thursday falling below 1.2950 as uncertainty surrounding trade talks and Britain’s future relationship with the EU weighed on investors. Having enjoyed a period of relative optimism and an expectation that both the UK and EU had at last found some common ground the stalemate and standoff resurfaced. Trade talks have soured already, while comments from French Finance Minister, Bruno Le Maire, suggesting British financial services firms will not have access to EU markets unless they agree to EU rules amplified the divide between British and European expectations. Having fallen 2% this week Sterling touched intraday and year to date lows at 1.2922 and we expect only shallow and short run rally’s through the coming weeks and months with the overwhelming bias still skewed to the downside, that is until a trade agreement and true exit strategy is reached.

Safe haven assets fell for a fourth consecutive day, with both the Yen and Swiss Franc losing ground against the USD as investors appetite for risk continued to improve. Measures taken by Chinese health and economic officials have encouraged markets, fostering increased optimism that the spread of the virus will be contained while the economic fallout will be muted by stimulus measures. The PBoC has pumped billions of dollars into the economy and financial system this week in a bid to get in front of any slowdown that might arise as a result of the virus while officials report “positive” results in preventing further widespread contamination.

The Euro touched two-month lows against the Greenback following weaker than anticipated industrial manufacturing orders in December. Data showed new orders for German made goods fell over 2% in the lead up to X=Christmas, the largest monthly depreciations in 10 months and well off the forecast .6% upturn. Falling below 1.10 the Euro opens this morning at 1.0978.

Expected Ranges

NZD/USD: 0.6390 - 0.6490 ▼

NZD/EUR: 0.5830 - 0.5890 ▼

GBP/NZD: 1.9880 - 2.0220 ▼

NZD/AUD: 0.9530 - 0.9660 ▼

NZD/CAD: 0.8530 - 0.8620 ▼