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Kiwi on the brink of break above 0.67 US cents

NZD - New Zealand Dollar

The New Zealand dollar enjoyed a modest upturn through trade on Thursday, creeping toward resistance at 0.67 amid sustained US dollar selling. While commodity currencies came under pressure amid a fall in oil prices, the NZD remained largely range bound, bouncing between 0.6620 and 0.6680 for much of the domestic session, before a tweet from President Trump suggesting the November election should be delayed prompted a swift USD sell off and saw the NZD drive toward resistance at 0.67. Fears President Trump will rebuke the results should he lose the election prompted heightened USD uncertainty and provided another catalyst to dump the world's base currency.

Attentions now shift to US lawmakers. Republicans and Democrats remain at loggerheads over the size and structure of the next fiscal stimulus program. Republicans are looking to scale back unemployment claims while democrats are pushing to ramp up spending in a bid to prop up the economy and those most vulnerable. The current unemployment benefit scheme ends today, with no clear plan of secession in place. Failure to implement a stop gap measure will leave millions of Americans out of work without government support. When other major governments are diving deep into the war chest, the US continues to battle partisan politics. Failure to reach an agreement could prompt heightened volatility on Monday and provide the catalyst to push the NZD through 0.67 US cents.

Key Movers

The US dollar extended its recent downturn amid suggestions of a delay to the November election and a dire economic outlook. The dollar came under heavy selling pressure following the Presidents suggestion the election should be delayed, ensuring issues with mail voting were ironed out. The comments sparked fears the President would reject the election result, adding increased political uncertainty into an already fragile domestic environment. US GDP all contracted at an alarming rate, with Q2 growth almost 33% down on this time last year. While there have been signs of a recovery since the April low, the US remains in the grips of the coronavirus, unable to curb its spread and while States refused to reinstate lockdown measures, there are signs activity and mobility are levelling off as citizen's activities and patterns change amid fear of the virus. With the US interest yield advantage eroded, a broadly positive risk on mood and renewed Euro demand the USD is likely to remain under pressure through the back half of 2020.

The Euro and GBP both outperformed through Thursday with the single currency continuing to bask in the aftereffects of the EU recovery Fund agreement and largely positive signs surrounding COVID-19 containment. While hotspots for new infections are emerging across the continent numbers remain manageable (at this stage) and with the rate of infection well short of that in the US, renewed demand for the euro is expected to continue. Having broken 1.18, the currency is poised to move above 1.1850 and extend toward 1.20 in coming days/weeks.

Sterling broke above 1.30 amid ongoing US selling. While the UK remains embroiled in Brexit negotiations and struggles to respond to the economic effects of the pandemic its recent upturn can only be attributed to broad based USD weakness. Sterling touched 1.3102 before edging lower into this morning Australasian open.

Expected Ranges

NZD/USD: 0.6580 - 0.6730 ▲

NZD/EUR: 0.5630 - 0.5680 ▼

GBP/NZD: 1.9230 - 1.9720 ▲

NZD/AUD: 0.9240 - 0.9360 ▲

NZD/CAD: 0.8830 - 0.9030 ▲