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NZ dollar falls as sentiment in equities markets sours

NZD - New Zealand Dollar

The Kiwi dollar is weaker this morning when valued against the Greenback with the NZD down 1% on Friday closing around 0.6060. There was another sharp fall in NZ rates last week, as the Reserve Bank of New Zealand (RBNZ) kept the foot on the throttle with bond buying. The Greenback strengthened on Friday amidst the falls in equities. The RBNZ announced on Friday that it would keep government bond purchases at $1.35b for this week, triggering a further sharp fall in NZ government bond yields.

On the data front on last week we saw the release of the ANZ consumer confidence index fell to an almost-record low of 84.8. While every component part of the index dropped in April. Looking ahead this week and on Tuesday we will see the release of both Building Consents m/m and ANZ Commodity Prices m/m. All attentions will turn to Wednesday’s unemployment figures with unemployment expected to rise to 4.4%. From a technical perspective, the NZD/USD pair is currently trading at 0.6026. We continue to expect support to hold on moves approaching 0.6016 while now any upward push will likely meet resistance around 0.6092.

Key Movers

The USD Dollar advanced through trade on Friday as a sustained risk off run permeated equity and currency markets, prompting a broad correction in risk asset values. The Dollar index advanced four tenths of a percent, marking a 1% advance on the week as escalating tensions between China and the rest of the world as to the origin of the coronavirus, persistent softness across macroeconomic indicators and fears a second wave of infections will materialise as economies open up forced investors toward haven assets.

Risk sentiment remains the primary driver across currency markets and as optimism falters we anticipate the USD will remain well bid. The recent risk sentiment correction has raised questions as to the speed and timing behind the v-shaped recovery in equity and currency markets following the March sell off. Indicators suggest the recession may last longer than first anticipated and as such the current recovery may be nothing more than a bear market bounce, opening the door to another risk off run, bolstering support for the USD.

The Euro has reached an inflection point with risks still skewed to the downside. Having bounced back through 1.0950 attentions this week turn to EU leaders (Friday) with investors keenly attuned to any details surrounding the proposed COVID-19 support package, while US jobless claims, services data, durable goods orders and non-farm payroll numbers dominate the macro docket through the latter half of the week.

Expected Ranges

USD/NZD: 0.5900 – 0.6100 ▼

NZD/AUD: 0.9300 – 0.9500 ▼

GBP/NZD: 2.0500 – 2.0700 ▲

NZD/EUR: 0.5400 – 0.5600 ▼

NZD/CAD: 0.8400 – 0.8600 ▼