Daily Currency Update

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NZD outstrips major counterparts as risk on mood continues

NZD - New Zealand Dollar

The New Zealand dollar enjoyed strong gains through trade on Tuesday, extending the current upswing as sustained improvements in risk sentiment continue to drive demand across commodity and growth sensitive currencies. Having broken through 0.63 the NZD rally extended beyond 0.6350 to touch intraday highs at 0.6372.

Markets continue to ignore the more immediate risk off indicators, shunting aside escalating US/China trade tensions, US social upheaval and the largely unchecked spread of the coronavirus throughout Latin and South America. The risk on narrative is instead being driven by expectations for a rebound in global economic activity through H2. While there are threats to the current risk on narrative there is a growing consensus the current mood will continue through the short term as initial indicators suggest a positive response to the partial economic re-opening. As the focus shifts away from the human cost to the economic cost and more sectors within the global economy open up there is scope to suggest the NZD upturn will continue. With 0.65 now in sight our attentions turn to preliminary US non-farm payroll numbers for further guidance as to the state of the broader US labour market.

Watch resistance on moves approaching 0.64 with a break at this handle opening the door to extended gains approaching 0.65

Key Movers

The US Dollar correction continued through trade on Tuesday outstripped only by the JPY as the worst performing currency among major counterparts. Having touched three month high just two weeks ago the USD dollar index has suffered a swift and sharp downturn, correcting 3% through the last fortnight with ample scope for further declines. The dollar has outperformed for an extended period and there has long been a suggestion a broader correction was needed; the question was around timing. If the current shift is the beginnings of a broader USD repositioning there is a real possibility of extended downside.

The Euro and GBP both enjoyed modest gains up three and four tenths of a percent as Brexit negotiations continue and Britain appears to be beginning to compromise in order to avoid a hard Brexit come the end of the year.

Attentions today turn to a slew of European services data as a key marker as to the scale of recovery since lockdown measures were enforced, while preliminary US non-farm payroll numbers dominate the US ticket. With the labour market in ruins, the coronavirus pandemic continuing to spread and social upheaval spreading across the country, hope the US will swiftly bounce back are beginning to dwindle.

Expected Ranges

NZD/USD: 0.6230 - 0.6500 ▲

NZD/EUR: 0.5550 - 0.5780 ▲

GBP/NZD: 1.9420 - 2.0010 ▼

NZD/AUD: 0.9150 - 0.9305 ▼

NZD/CAD: 0.8450 - 0.8680 ▲