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Kiwi stumbles as demand for risk shifts

NZD - New Zealand Dollar

The New Zealand dollar edged lower through trade on Wednesday, testing supports at 0.59. Risk sentiment faltered and the NZD followed equities and spreads lower as the USD and JPY bounced on haven plays. A shift in tone from President Donald Trump sparked the risk off mood as the situation in the US worsens and health professional estimate up to 200,000 citizens could succumb to COVID19. Having touched intraday lows at 0.5880 the NZD edged back above 0.59 and opens this morning buying 0.5916 US cents.

Direction will again derive from developments in the fight against the Coronavirus. Faltering risk sentiment and extended global lockdowns do not bode well for the Kiwi. While US funding pressures are easing, the extended period of global isolation is sure to drive a deeper and longer run global recession, fostering an environment that does not typically support NZD upside. With Banks and governments emptying their coffers in a bid to limit the health and economic impact failing to fully right the NZD sell off we could see markets test March lows in another bear run should sentiment make another abrupt turn.

Key Movers

The risk off shift help bolster demand for the JPY and USD through trade on Wednesday as both currencies advanced near 1% against most other major counterparts. The USD remained well bid, doubling down on gains enjoyed through month end rebalancing, edging upward across a variety of key indices, while forcing the EUR back below 1.10.

Attentions now turn to US unemployment claims as a critical early marker of just how deep and widespread the economic impact of the COVID19 pandemic will be. Last week 3.3 million people filed for unemployment with conservative estimates suggesting a further 3.6 million will join the queue, with some economists forecasting a read nearer 6 million. As the coronavirus brings both domestic economies and the global economy to a grinding halt another poor unemployment read will only highlight the expense that lays before governments in supporting their citizenry through this unprecedented crisis.

Expected Ranges

NZD/USD: 0.5780 - 0.6020 ▲

NZD/EUR: 0.5330 - 0.5480 ▲

GBP/NZD: 2.0420 - 2.1280 ▲

NZD/AUD: 0.9680 - 0.9920 ▲

NZD/CAD: 0.8280 - 0.8460 ▲