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New Zealand dollar drops on the back of falling Retail Sales

NZD - New Zealand Dollar

The New Zealand dollar, like its Australian counterpart gained earlier in the week taking the pair towards 0.6160 against the US dollar. However, the pair turned lower on Friday with the Greenback preserving its strength and declining Retail Sales. Statistics New Zealand revealed first quarter sales dropped by 0.7% which was the largest fall in eight years, the catalyst for the drop was the fact the New Zealand closed its borders to foreigners and also closed all but essential businesses down in the last week of March. The NZD/USD slipped from opening at 0.6125 to an overnight low of 0.6081.

Opening this morning at 0.6094, we can expect to see near-term support levels around 0.6060 followed by 0.6020. On the upside, resistance is sitting at 0.6160. Looking ahead there are no scheduled releases locally today, in fact it’s a quiet day all round with the US and UK observing bank holidays. Traders will be looking towards tomorrow Trade Balance figures, followed by Wednesday’s RBNZ Financial Stability Report which is released twice a year. It’s important as it provides insights into the bank's view of inflation, growth, and other economic conditions that will affect interest rates in the future.

Key Movers

On Friday, the Bank of Japan announced that it will extend the term of loans for the lending scheme aimed at combating the coronavirus fallout to 6 months from 3 months. However, the BoJ kept its policy unchanged at -0.1% as expected. The BoJ Governor noted that the economic recovery would likely be a “V” shaped recovery. The USD/JPY rate was little changed and is bouncing around 107.57.

After a strong start early last week, the GBP/USD exchange rate has reversed lower following weak Retail Sales numbers. Figures from the Office for National Statistics reported an 18.1% drop in sales for the month of April vs an expected 15.8% which dragged the pair down towards 1.2160. Further to this, the sterling is weighed by a stronger Greenback which is benefiting from a decline in risk sentiment.

Meanwhile, the ECB’s Monetary Policy Meeting Accounts showed that the Governing Council could adjust the Pandemic Emergency Purchase Programme (PEPP) and other tools at the June meeting. The bank is “fully prepared” to step up its bond-buying programme to support the eurozone economy which is heading for its worst postwar recession by adding at least an extra €500bn to its asset-purchase plans at its next monetary policy meeting on June 4. EUR/USD is buying 1.0898.

Expected Ranges

NZD/USD: 0.6020 - 0.6160 ▼

NZD/EUR: 0.5480 - 0.5640 ▼

GBP/NZD: 1.9820 - 2.0250 ▼

NZD/AUD: 0.9280 - 0.9400 ▲

NZD/CAD: 0.8420 - 0.8620 ▼