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NZD tests 5 month lows against AUD as central bank policy diverges

NZD - New Zealand Dollar

The New Zealand dollar offered little to excite investors through trade on Wednesday again struggling to extend beyond 0.5950 and break resistance at 0.60. With little of note on the domestic docket the NZD found direction in improvements in broader risk sentiment as oil prices rebounded and the promise of continued fiscal stimulus helped ease market jitters. Brent crude rebounded, following two consecutive days of heavy losses while WTI futures surged. Having touched intraday highs at .6005 the NZD drifted lower throughout the US session maintaining a 50 point range and bouncing off 0.5950 through the rest of the session.

Despite maintaining a narrow range against the worlds base currency the NZD downtrend against the AUD continued, breaking below 0.9450 to touch 0.9412. Buoyed by a strong surge in domestic retails sales the AUD outstripped major counterparts forcing the NZD toward is lowest level in 5 months. While we expect Australian consumer spending to moderate in the months ahead the NZD is vulnerable to further downward pressures. The RBNZ and Governor Orr have so far adopted a much more aggressive monetary policy platform an QE program when compared with that of their Antipodean counterparts forcing investors toward the AUD as the more attractive yield play through the medium term.

Attentions today remain affixed to broader risk trends with US unemployment claims and a host of European manufacturing and services data dominating the macroeconomic docket.

Key Movers

The US dollar index edged marginally higher through trade on Wednesday, touching two weeks highs at 100.50 before shifting lower to hold at 100.39. Despite an improvement in broader risk sentiment and rebound in oil prices safe havens remained well bid through Wednesday as broader volatility across currency markets eased and investors looked to take stock. While commodity currencies rallied the Index found support in a falling Euro as the combined unit tested 1.08 ahead of a host of key service and manufacturing data sets due today. The Euro gave up gains won on the back of report EU leaders may be closer to agreeing a package of emergency funding and are set to meet again today. Disunity among member countries as to the best way to support the common market through the economic fallout spurred by the coronavirus is weighing on the combined unit as attentions turn to a slew of data sets that continue to trend southward. Attentions today a host of German, French and EU service and manufacturing PMI reports with an extended downturn only affirming the need for extensive fiscal and monetary policy support well into the future.

Expected Ranges

NZD/USD: 0.5880 - 0.6010 ▼

NZD/EUR: 0.5430 - 0.5550 ▲

GBP/NZD: 2.0480 - 2.0920 ▲

NZD/AUD: 0.9360 - 0.9490 ▼

NZD/CAD: 0.8390 - 0.8510 ▼