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Risk On; Kiwi bounces of lows to push back toward 0.65 US Cents

NZD - New Zealand Dollar

The New Zealand dollar enjoyed mixed fortunes through trade on Monday, slipping throughout the domestic session before creeping higher overnight. Concerns surrounding new coronavirus infections across the US and China weighed on markets demand for risk as investors looked to adjust positions coming out of the weekend. The NZD dipped below 0.64, touching intraday lows at 0.6382 before a shift in sentiment helped drive a move back toward 0.6480. Broad based US dollar weakness helped fuel the upturn, as the Federal Reserve introduced changes to its Corporate Bond Buying Programme. The Fed will now target individual corporate bonds, expanding the scope and scale of its monetary policy stimulus, adding more cash into the mix.

The NZD remains strongly correlated with risk and we continue to watch equity performance as pre-cursor or marker of sentiment and possible kiwi direction. With little of note on the docket today a sustained risk on mood could help the NZD push back above 0.65, while a shift in sentiment will likely prompt a move back toward 0.64/0.6380.

Key Movers

The risk on move overnight saw haven assets close the day lower as investors jumped back into to risk and growth correlated currencies. The USD was the weakest of the majors with the dollar index falling half a percent, while the JPY and CHF also shifted lower. The Dollar came under heavy selling pressure after the FED announced it would expand its bond buying program to include individual corporate bonds. The expansion of its monetary policy program emboldened investors to buy the dip and jump back into risk correlated assets as the availability of cash and central bank funding will seemingly continue through the medium term.

With little of note on the macroeconomic docket today attentions will remain with the broader risk tone. The Bank of Japan’s monthly policy meeting will likely pass without incident while US retail sales are unlikely to tip the scales. The market continues to largely ignore backward looking fundamentals instead looking to sentiment and forward guidance as markers of future performance and signals guiding the speed of any economic recovery. That said a strong retail sales print could bolster risk appetite as consumer spending increases amid easing restrictions.

The UK claimant count will also provide a valuable insight into the health of the labour market. A front runner to official unemployment numbers it offers a sneak peak as to the trend of labour market performance. A print above 400,000 will add mounting pressure to the GBP as it continues to struggle with the coronavirus and opening up the broader economy.

Expected Ranges

NZD/USD: 0.6350 - 0.6520 ▲

NZD/EUR: 0.5650 - 0.5780 ▲

GBP/NZD: 1.9320 - 1.9580 ▼

NZD/AUD: 0.9305 - 0.9450 ▼

NZD/CAD: 0.8680 - 0.8820 ▼