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COVID Free and a 5-month high; Kiwi upturn continues

NZD - New Zealand Dollar

The New Zealand rose against most major counterparts, in what was a relatively quiet start to the week. Equity markets continued their bullish upturn, dragging currencies higher as the NZD and AUD outstripped the USD, GBP and EURO. The S&P 500 advanced half a percent on the day, pushing the index into positive territory for year, an incredible feet given the panic that enveloped investors in March and a clear illustration of the confidence building across financial markets. The NZD pushed through 0.6550 to mark new 5-month highs at 0.6567, before creeping lower into this morning’s open. Added support came after Prime Minister Jacinta Arden confirmed New Zealand is now free from the Coronavirus. With no new cases reported in 17 days and the last known active case recovered the country has seemingly beaten the pandemic. Arden announced New Zealand will return to level 1 restrictions, effectively re-opening the economy in full with the only meaningful restriction, international travel. With the domestic economy re-opening the path to economic recovery is now largely unchecked and well ahead of initial estimates. A swift rebound will pave the way for easing monetary policy and fiscal support needs, theoretically helping boost the NZD further, while medium term forecasts show ample room to the upside there is a suggestion the swift upturn of the last 2 weeks may be entering overbought territory meaning immediate upside will likely be harder won.

Attentions this week turn to the FOMC and Federal reserve policy announcements as a possible marker for monetary policy divergence.

Key Movers

The US dollar remains under pressure, slipping against all major counterparts through trade on Monday. The Japanese Yen and Swiss France both enjoyed strong gains, recovering much of lasts weeks losses and topping gains across majors for the day. The upturn for the JPY and CHF suggests Monday’s move was not a typical risk on shift but rather broad-based USD weakness. With the US struggling to contain the coronavirus and Congress slow to deliver Fiscal support investors are moving away from the USD as the safe haven dynamic shifts.

The Euro continues to enjoy sustained upside support, holding near 1.13 on open this morning, while the GBP advanced four tenths of a percent pushing toward 1.2750. Despite its own underlying instability, the GBP has enjoyed strong gains through the last month, bouncing off lows at 1.2080. Given the broad-based USD weakness a better measure or Sterling is its performance against key crosses. The GBP has plunged against both the NZD and AUD while Euro/pound despite moderating through the start of June is up almost 2 cents since the start of May. The Coronavirus continues to plague the UK, and while they reported the lowest number of fatalities since the March lockdown began, 55 people still lost their lives to COVD 19 a number much to high if restrictions are to see any meaningful easing. As the UK struggles to throw off the coronavirus and Brexit looking ever larger there is little to drive GBP upside through the medium term.

Attentions today remain with risk and broad-based US direction ahead of tomorrow FOMC meeting and Fed policy announcement.

Expected Ranges

NZD/USD: 0.6380 - 0.6630 ▲

NZD/EUR: 0.5720 - 0.5850 ▲

GBP/NZD: 1.9125 - 1.9520 ▼

NZD/AUD: 0.9280 - 0.9410 ▲

NZD/CAD: 0.8680 - 0.8830 ▲