Daily Currency Update

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NZD steady in face of broader correction in risk appetite

NZD - New Zealand Dollar

The New Zealand dollar tracked sideways throughout trade on Thursday, holding up well in the face of a broader shift in risk sentiment. Having broken through 0.61 on Wednesday the NZD maintained gains testing resistance at 0.6130 and marking new highs at 0.6171, before profit taking and month end rebalancing forced the currency lower into this morning’s open. Despite a moderation in volatility throughout the latter half of April the NZD has outperformed, advancing some 3% on the month, recouping much of the losses suffered in the March liquidity crunch.

Having held a tight range for much of the domestic session, the NZD enjoyed strong gains against the AUD recovering some of the recent losses as investors forced the AUD lower amidst shipping risk demand. Having fallen through 0.9350 the NZD jumped almost 1 cent to touched 0.9430 before edging marginally lower into the morning. Diverging monetary policy platforms have prompted a swift correction in NZD/AUD fortunes throughout April and while there is scope for a short-term bear market bounce back to 0.95, risks remain skewed to the downside with a deeper correction likely as we edged nearer the second half of the year.

Key Movers

The US dollar enjoyed mixed fortunes through trade on Thursday, advancing against risk assets while giving up gains against the euro and GBP. The euro jumped through 1.09 and 1.0950 to touch session highs at 1.0965 after the European Central Bank announced it would lower bank lending rates in bid to prompt growth amidst the COVID-19 fallout, while disappointing those investors looking for an extension in the current QE platform. Some market participants were pricing in an extended bond purchase facility, suggesting the ECB would begin to include junk bonds in its monthly bond buying scheme. With President Lagarde offering little on top of the current program, markets were forced to correct euro positions prompting a short-term bounce in the wake of the policy meeting.

The Great British pound followed the euro higher, pushing through 1.26 to touch highs at 1.2605 before edging lower into the start of the Australasian trading day. Sterling remains heavily linked to broader risk trends and with the UK still some way off loosening lockdown restrictions as the country struggles to contain the COVID-19 outbreak, there are headwinds preventing extended upside through the short and medium term. Europe is beginning to ease restrictions as the devastation caused by the coronavirus outbreak is abating, leaving the UK behind as lockdown measures are expected to remain in play for at least another week.

Attentions remain squarely affixed to developments in risk demand leading into the weekly close.

Expected Ranges

NZD/USD: 0.5980 - 0.6190 ▲

NZD/EUR: 0.5420 - 0.5680 ▼

GBP/NZD: 2.0220 - 2.0780 ▲

NZD/AUD: 0.9330 - 0.9450 ▲

NZD/CAD: 0.8450 - 0.8620 ▲