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Kiwi struggles amid reports of 2nd wave of infections in Beijing

NZD - New Zealand Dollar

The New Zealand dollar retreated through trade on Tuesday, giving up gains above 0.6450 amid a US dollar rebound. Stronger than anticipated US retails sales data helped bolster demand for the worlds base currency and forced the NZD toward intraday lows at 0.6419. While moves were modest and volatility remained largely muted the Kiwi’s move lower ended it’s correlation with equity markets. Equities continued Monday’s rally while safe haven currencies led gains creating an unusual risk on/risk off mood across differing financial assets. With Beijing grappling with a string of new COVID19 cases, the threat of a second wave of infections derailing China’s economic recovery weighed on commodity led and growth correlated currencies.

Attentions today turn to reports of two new cases of Coronavirus as travelers returning from the UK tested positive. Markets largely ignored the announcement as community transmitted cases remain at zero yet a hiccup in quarantine protocols suggest the travelers may not have adhered to all self-isolation measures. Having just declared itself COVID19 free the two new cases serve a timely reminder of the importance in maintaining strict quarantine controls. Having bounced off lows at 0.6419 the NZD currently buys 0.6443 US cents with resistance forming on moves approaching 0.65.

Key Movers

The US dollar advanced through trade on Tuesday as risk sentiment improved amid an uptick in US retail sales and added monetary policy support from the Federal Reserve. US retail sales jumped the most on record in May, albeit from a historically low base, as consumers enjoyed the freedoms of a re-opening economy. The uptick in retail sales was supported by reports from the White House a new trillion-dollar infrastructure program will be introduced to stimulate domestic activity, while the Fed offered further insight into its corporate bond purchasing programme. The dollar index jumped 0.2%, forcing the Euro back toward 1.1250.

The Japanese Yen held onto last weeks risk off gains, edging marginally higher after the Bank of Japan promised fresh monetary policy support.

The Great British Pound ticked higher as labour market data showed the unemployment rate flattened, printing better than expected while Brexit talks appeared constructive. Having touched intraday highs at 1.2684 Sterling opens marginally lower at 1.2562.

Attentions remain squarely affixed to increased infections rates across China and the US. a correction in the outbreaks should foster renewed risk demand and bolster growth and commodity correlated currencies while a sustained 2nd wave will weigh on fears of a broader slowdown in the economic rebound and prompt a more meaningful push to safe haven assets. On a positive note an Oxford university study has shown that an existing drug (dexamethasone) has shone positive sings in alleviating the worst symptoms and reducing death rates among those most severely affected by the Coronavirus.

Expected Ranges

NZD/USD: 0.6380 - 0.6520 ▼

NZD/EUR: 0.5650 - 0.5780 ▼

GBP/NZD: 1.9380 - 1.9720 ▲

NZD/AUD: 0.9320 - 0.9420 ▲

NZD/CAD: 0.8680 - 0.8820 ▼