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Kiwi retreats amid US bear market bounce

NZD - New Zealand Dollar

The NZD edged marginally lower through trade on Wednesday, giving up 13 month highs to touch intraday lows at 0.6742. Having touched 0.6785 early this week the NZD gave up gains amid a sustained US bear market bounce. Markets largely ignored commentary from RBNZ governor Orr, despite the dovish undertone. Orr reiterated the Banks commitment to pursuing additional monetary policy tools in a bid to guide the economy through the COVID-19 crisis. Orr offered little outside the banks recent narrative and markets have largely priced in a shift to negative interest rates in Q1 2021, instead the NZD succumbed to a broader USD bounce. The world’s base currency found support, jumping off 28 month lows to advance against the majority of major counterparts.

The NZD outperformed the AUD, pushing through 0.9240 following Australia’s weaker than anticipated Q2 Print. The NZS has found some support when compared with its antipodean cousin, bouncing off early august lows approaching 0.9050. Having advanced 2 cents we expect the downtrend will continue as the economic realities of New Zealand’s harsh lock down measures emerge.

Key Movers

The USD outperformed major counterparts through trade on Wednesday, bouncing off 28 months lows. The BBDXY was up 0.5% on the day despite weaker than anticipated leading employment data. ADP non-farm payrolls rose at half the pace expected, opening the door to a softer NFP print on Friday.

The Euro retreated Wednesday slipping back below 1.19 to touch 1.1825. Having touched 1.20 early this week profit taking and a correction in long positions forced the single currency lower, while a fall in European interest rates helped fuel USD yield support.

Attentions now turn to Fridays US non-farm payroll print. While there are some signs the US economy is recovering, gains are modest and well below pre-covid levels. With new infection rates still alarmingly high and fiscal support wanting we expect the USD downtrend will resume in the weeks and months ahead.

Expected Ranges

NZD/USD: 0.6680 - 0.6790 ▼

NZD/EUR: 0.5650 - 0.5730 ▲

GBP/NZD: 1.9520 - 1.9880 ▼

NZD/AUD: 0.9150 - 0.9780 ▲

NZD/CAD: 0.8780 - 0.8870 ▼