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Kiwi makes fresh lows as pandemic intensifies

NZD - New Zealand Dollar

Friday’s session saw panic envelop financial markets as ongoing concerns about the coronavirus situation intensified. With the number of confirmed cases outside of China accelerating, the World Health Organization raised their risk assessment for the virus to “very high”. The WHO also confirmed there were 1318 new cases globally, including the first case in New Zealand and nearly 20 new fatalities.

Friday’s session saw the New Zealand Dollar fall from 0.6260 to 61.91 on the day, levels we have not seen since 2015. It did recover slightly, and we open this morning’s session at 0.6214. Similarly, the AUD fell from 0.6540 to 0.6434, representing its lowest level since 2009. AUD/NZD finished the session relatively unchanged at 104.16 despite a volatile trading session.

First off the rank on the data front for the Kiwi is Q4 terms of trade which are expected to print lower at 1.5% on Monday. Although this figure would represent an all time high, markets are unlikely to take too much notice given the data is somewhat outdated and does not encompass affects of the coronavirus. The rest of the week only features second tier domestic data with traders likely to be watching the RBA rate decision from across the pond on Tuesday.

Key Movers

In light of the heightened virus fears, traders were keen to shed risk assets which resulted in significant market moves. US equities were 0.8% lower in line with record low US bond yields and a depreciation in risk currencies and commodities. The USD index closed down 0.4% on the day as the worlds base currency was dragged lower by comments from Fed Chair Powell who stated that although economic fundamentals in the worlds largest economy remained strong, the ongoing Coronavirus pandemic poses ‘evolving risks to economic activity’. He then confirmed that the Fed is closely monitoring the situation and will use their tools to act as appropriate to support the economy. Markets are now pricing a 50% chance of a 50 basis point cut at the next Fed meeting on the 18th of March.

The EUR was rangebound on Friday with the safe haven yen clearly the best performer on the day. USD/JPY touched 5-month lows, falling from 109 to 107.51. In the week ahead, traders will be closely watching a raft of PMI numbers out of Asia, and particularly China, for an indication of the effects the virus is having on the manufacturing sector. Aside from the RBA policy decision and Australian Q4 GDP, importance will also be placed on Friday’s non-farm payrolls print due out of the worlds largest economy on Friday. Markets are expected to continue to be impacted by any developments in the coronavirus situation with any positive developments likely to be supportive of risk currencies such as AUD and NZD.

Expected Ranges

NZD/USD: 0.6190 - 0.6260 ▼

NZD/EUR: 0.5630 - 0.5690 ▼

GBP/NZD: 2.0420 – 2.0540 ▲

AUD/NZD: 1.0390 - 1.0435 ▼

USD/CAD: 0.8315 - 0.8390 ▼