Daily Currency Update

Get access to our expert daily market analyses and discover how your currency has been tracking with our exchange rate tools

Kiwi capitalizes on risk-on flows during American session

NZD - New Zealand Dollar

The Kiwi has capitalised on risk-on flows overnight, rising from 0.6130 to 0.6227, representing a three-month high against the greenback. The kiwi’s strength also forced the AUD/NZD lower, as it fell from 1.0730 to 1.0693 throughout trade.

Yesterday’s domestic trade balance data displayed a better than expected month on month recovery of 1,267m. Taking a quick look at the read, imports dropped to 3.99B from 5.09B with exports only slightly weaker at 5.26B compared with 5.82B previously. The Kiwi was largely unchanged on release, with the bulk of its Tuesday gains delivered during US trade as the S&P500 rose to three-month highs and improved risk sentiment saw risk currencies rally.

At the time of writing, the RBNZ’s bi-annual financial stability report is just being digested by markets. Initial market impacts have been muted with the report indicating that the financial system is in a solid position to weather the economic fallout caused by COVID-19. It also reiterated that the RBNZ is working on a number of initiatives to support the financial system and stimulate lending flows.

Having broken through previous resistance at 0.6175, traders will be looking for a sustained period above 0.6200 before moves higher will be considered. On the downside, a fall beneath 0.6170 could pave the way for moves lower and test support at the 5-day EMA of 0.6085.

Key Movers

With risk sentiment markedly higher amid growing signs of economic recovery from the COVID-19 crisis, commodity currencies, global equities and bond yields all outperformed on Tuesday. The S&P 500 rallied through the 3000 level to finish up 1.2% on the day, crystallising a three-month high in the process. This saw the defensive USD come under selling pressure, allowing EUR/USD to rise from 1.0920 to 1.0996 and kept USD/CAD on the back foot near its lowest level in 11 weeks.

The CAD was also aided by rises in commodities. Brent crude oil futures were up 1% to 35.90 with copper also rising 1.2%. Gold fell 1.3% on the day, consistent with the risk-on sentiment. The broad-based USD weakness also allowed the GBP to soar as rumours circulated that suggested progress was being made in Brexit talks. GBP/USD rallied to touch key resistance levels around 1.2363 on the day, with traders eyeing next Mondays round of Brexit talks.

Looking ahead to a pretty quiet day on the macroeconomic data front, centre stage will be occupied by a discussion by the Fed’s Bullard on the economy as well as the release of the US Fed’s Beige book. In the Asian session second tier data out of Australia and China will be of passing interest.

Expected Ranges

NZD/USD: 0.6175 - 0.6240 ▲

NZD/EUR: 0.5592 - 0.5670 ▲

GBP/NZD: 1.9815 – 2.0005 ▼

AUD/NZD: 1.0680 - 1.0750 ▼

NZD/CAD: 0.8520 - 0.8595 ▲