Daily Currency Update

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Expectations for US rate cut help Kiwi move clear of 12 month lows

NZD - New Zealand Dollar

The New Zealand dollar edged higher through trade on Thursday pushing back through 0.63 as broader US dollar weakness prevented further risk driven falls. Correcting US interest rate expectations steered direction, overshadowing the broader risk off mood as investors moved to price in a quarter point rate cut within the next 2 months as part of a broader monetary policy adjustment through the coming 12 months.

Touching intraday highs at 0.6332 the NZD met resistance on moves approaching 0.6340/50 and opens this morning at 0.6313. Attentions remain affixed to deteriorating headlines illustrating the spread of the coronavirus and we anticipate the NZD will remain under pressure through the short term.

Key Movers

The Great British pound touched five-week lows against the Euro through trade on Thursday as trade talks stalled and fiscal spending expectations faltered. Britain maintained a hardline stance in negotiations with EU trade officials pushing for binding access to the EU’s financial market. London, as the financial hub of Europe is dependent on access to the EU as its biggest market for key banking and financial services. Failure to secure a favourable trade agreement could have an immeasurable impact on the UK's financial centre. Slipping back below 1.2860 we expect sterling will remain range bound around the 1.30 handle with larger swings as GBP volatility increases.

The US dollar tracked lower through trade on Thursday as market priced in an increased likelihood the Fed will cut interest rates before May. Futures markets have now fully priced in a quarter point rate cut in April with a full percentage point reduction pushed through by March 2021. The dollar index fell to three-week lows moving through 98.40 as investors reposition and unwind recent short term carry trade positions and correct US economic expectations in the face of the spreading coronavirus.

Expected Ranges

NZD/USD: 0.6240 - 0.6330 ▲

NZD/EUR: 0.5690 - 0.5790 ▼

GBP/NZD: 2.0220 - 2.0520 ▼

NZD/AUD: 0.9570 - 0.9635 ▼

NZD/CAD: 0.8380 - 0.8520 ▲