Daily Currency Update

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Kiwi struggles to break resistance and extend back above 0.61 US cents

NZD - New Zealand Dollar

The NZD edged marginally higher through trade on Tuesday, bolstered by a bounce in demand for risk. Easing of social distancing restrictions around the world fostered increased optimism across equity markets, dragging risk and emerging market currencies higher. Domestic attentions turned to Dairy prices with New Zealand’s key export falling 0.8%, the 6th consecutive fall across the last 7 auctions. Prices have fallen steeply throughout the last year and we anticipate sustained softness through the months ahead as demand from the US and Europe continues to soften. Despite the bleak outlook investors had largely priced in the correction and the latest read had little impact on broader intraday moves. Having touched highs at 0.6076 the NZD made a number of failed attempts to break back above 0.6075 before edging lower into this morning open.

Attentions today turn quarterly employment data and the updated unemployment rate. Today’s reports provide a review of the labour market for March and perhaps only offer a partial insight into the impacts of the coronavirus with lockdown measures only introduced part way through the month. A significant downturn a miss on expectations could indicate a steeper than anticipated hit to employment in the months ahead, particularly important as New Zealand begins to roll back social distancing restrictions.

Watch resistance on moves approaching 0.6075 and 0.6130 with support on dips toward 0.6020 and 0.60.

Key Movers

The Euro fell sharply overnight down half a percent and back through 1.09 following a surprise ruling by Germany’s constitutional court in review of the ECB’s current asset purchase platform. While they agreed the ECB can continue the current program it must conduct a “proportionality assessment” throughout the next three months as a means of quantifying asset purchases and ensuring the purchase of government bonds remain consistent with each countries share of population and GDP within the Eurozone and does not become a mechanism funding governments fiscal programs. The decision reduces the scope and access to peripheral bonds markets and hampers the ECB’s ability execute is emergency pandemic driven QE program.

The US dollar index rallied on the back of Euro losses, while easing restrictions across some States helped bolster demand for US stocks and a surprising stable services print helped ease concerns surrounding the health of the broader US economy.

Attentions today turn to ADP private payroll data and EU economic forecast as the key macroeconomic drivers while risk demand and uncertainty continue to steer broader direction.

Expected Ranges

NZD/USD: 0.5980 - 0.6130 ▲

NZD/EUR: 0.5520 - 0.5620 ▲

GBP/NZD: 2.0250 - 2.0720 ▼

NZD/AUD: 0.9330 - 0.9450 ▼

NZD/CAD: 0.9350 - 0.9450 ▼