Daily Currency Update

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NZD marks fresh weekly lows as April’s upturn runs out of steam

NZD - New Zealand Dollar

The New Zealand dollar opens this morning in roughly the same position as Thursday, despite testing new lows throughout the day. The NZD was dragged below 0.60 US cents touching intraday lows at 0.5958 , following the AUD lower after a dismal labour market data print, before edging higher through the back half of the overnight session, pushing back through 0.60 and currently buys 0.6001 US cents. Worryingly the NZD has drifted lower through the week marking lower lows and lower highs, a suggestions the upturn enjoyed through April may have ended. The NZD remains vulnerable to shifts in risk sentiment as fears a second wave of infections will hamper the global recovery escalate. Prime Minister Arden announced a $50 billion package to guide the country through the economic crisis. Stimulus packages are helping to assuage fears of a complete an utter economic collapse but prospects of a swift rebound in activity are fading and a significant recession accompanied by long run Quantitative Easing appears increasingly likely.

Attentions today remain with risk trends with support on moves approaching 0.590 and 0.5880 and resistance on runs above 0.6030 and approaching 0.61.

Key Movers

The US dollar advanced against a basket of currencies through trade on Thursday with the DXY index pushing through 100.50 and marking a fresh 3 week high. Investors largely overlooked alarmingly high jobless claims pushing the worlds base currency higher on hopes of a bounce back in economic activity as parts of the country open up. Fears of a second wave of infections have capped gains but investors appear optimistic the recent slew of devastating macroeconomic indicators will improve once Americans go back to work. The yen and the Swiss franc offered little, suggesting the move wasn’t one driven by risk off moves and perhaps leaves the upturn vulnerable to a correction as investor focus inevitably turns to broader economic performance. Over 36 million Americans have filed for unemployment benefits since lockdown measures began in March as the weekly jobless claims report becomes an all-important measure of broader economic health. With sections of the economy re-opening in the weeks ahead analysts will be keenly attuned to future data points for any sign of improvement across employment numbers. There is a growing fear that temporary job losses may become permanent if the economy fails to respond quickly and markets will be looking for signals jobs are being reinstated quickly if the dollar is to maintain long run values.

The Great British pound fell to 5-week lows, slipping below 1.22 after data showed the economy contracted by a record 5.8% in March. The combination of coronavirus and Brexit woes are weighing on the pound with investors reluctant to extend long term GBP positions. The UK surpassed Italy as this week with the most COVID-19 casualties in Europe and appears some way off from meaningfully reducing social distancing restrictions. With Brexit risks still looming and broader economic pain expected the GBP will struggle on moves above 1.23 through the short term.

Expected Ranges

NZD/USD: 0.5880 - 0.6130 ▼

NZD/EUR: 0.5490 - 0.5620 ▲

GBP/NZD: 2.0020 - 2.0480 ▼

NZD/AUD: 0.9240 - 0.9360 ▲

NZD/CAD: 0.8350 - 0.8460 ▼