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Kiwi supported by talks of potential lockdowns eased to level 2

NZD - New Zealand Dollar

The New Zealand Dollar rallied on Friday by 0.83% as commodity-linked currencies were driven higher by a recovery in risk sentiment to close the week. Opening at 0.6085 against the greenback following a strong surge Thursday evening, the local currency reached intraday highs of 0.6134.

The Kiwi has recently been supported by the relaxation of restrictions following five weeks of level 4 lockdowns. Today it is possible that Prime Minister Jacinda Ardern will announce further reductions to level 2 restrictions for the country which would boost the local economy as businesses gear up to open and larger gatherings up to 100 people could resume.

The New Zealand dollar opens this morning at 0.6138 ahead of ANZ Business Confidence levels. We expect support levels to hold on moves approaching 0.6060, while any upward push will likely meet resistance at 62 US cents.

Key Movers

Unemployment figures in the United States on Friday surged to 14.7%, the worst print since the great depression. 20.5 million jobs have now been lost as the world’s largest economy braces for a severe recession due to COVID-19. Canada also recorded large job losses of 2 million people in April and the unemployment rate climbing from 7.8% to 13%.

The US Dollar topped out at 100.40 on Friday evening, losing steam following dismal unemployment figures, dropping to 99.10 on close. Equities were a shining light with major markets moving 1-2% higher as global markets price in the easing of lockdowns sooner than expected in developed countries.

Trade discussions between US and China looked to be under threat once again as President Donald Trump put the relationship on ice by blaming China for the outbreak of COVID-19 to Wuhan in 2019. As the country heads into economic uncertainty, Phase 1 of the US-China trade deal should be heading in the right direction despite Trump stating he was “very torn” above whether to pull the deal and strain already tense relations.

The EUR/USD fell to lows of 1.0778 last week as tension rises over its asset purchase program. The European Union could open a legal case against Germany following the German Constitutional Court ruling it had three months to justify purchases under its bond buying program. Bundesbank, the biggest of the Eurozone’s central banks has threatened to leave the scheme, and it is expected the ECB will provide a response before the June monetary policy meeting.

The week ahead looks to focus on both Chinese and United States inflation data due for release on Tuesday. This is followed by by the RBNZ rate statement on Wednesday and Australian unemployment figures to round off a busy week on the docket.

Expected Ranges

NZD/USD: 0.6060 - 0.6200 ▲

NZD/AUD: 0.9350 - 0.9450 ▲

GBP/NZD: 2.0000 - 2.0450 ▼

NZD/EUR: 0.5600 - 0.5700 ▲

NZD/CAD: 0.8480 - 0.8570 ▲