Daily Currency Update

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Kiwi buoyed by sustained risk-on drive

NZD - New Zealand Dollar

The New Zealand dollar rallied through trade on Thursday, pushing back through 0.62 US cents as a sustained bounce in equities helped fuel demand for risk. Equity markets pushed higher overnight as optimism surrounding the global economies post coronavirus recovery continues to grow. Having touched intraday highs at 0.6227, the NZD has drifted lower on open this morning and currently buys 0.6192 US cents.

The NZD’s strong correlation with equity markets has helped the currency push through key resistance handles this week with the USD forced toward 2-month lows as the Kiwi touched levels not seen since mid-March. While the currency remains vulnerable to a shift in risk sentiment, improving global optimism and a strong domestic footing could help foster a sustained short-medium run recovery back toward 0.64.

Attentions remain squarely affixed to the broader risk narrative for now with key macroeconomic indicators likely to come back into focus in the months ahead.

Key Movers

Safe havens were again the days big losers as the risk-on backdrop prompted investors to chase higher yields. The USD index fell half a percent, slipping below its 100-day moving average and marking a new two month low. Having broken key supports this week, sustained optimism could add further downward pressure as focus begins to shift to underlying macroeconomic performance and monetary policy.

The euro consolidated its break above 1.10, touching two-month highs as investors’ confidence that EU leaders will introduce extensive fiscal support in the coming months improved. This weeks 750billion euro proposal has helped narrow bond yield spreads for Italian and Spanish bonds as markets prepare for extensive stimulus programs through H2. While the current proposal is yet to be approved by all 27 EU countries, the current plan at least offers a starting point for joint debt negotiations.

Expected Ranges

NZD/USD: 0.6080 - 0.6250 ▲

NZD/EUR: 0.5530 - 0.5650 ▼

GBP/NZD: 1.9720 - 2.0020 ▲

NZD/AUD: 0.9310 - 0.9420 ▼

NZD/CAD: 0.8480 - 0.8620 ▲