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Kiwi dollar gains despite poor GDP print

NZD - New Zealand Dollar

The New Zealand dollar opened yesterday morning at 0.6730 and saw downside pressure during the domestic session following a poor GDP print for Q2 2020. NZD/USD saw intraday lows of 0.6685 as Gross Domestic Product plunged to -12.2% q/q, the largest contraction on record.

COVID-19 having an obvious impact, stalled the economy during a period of level four lockdowns. Despite the poor print it was still slightly above expectations of -13.5% and indicators are showing recently that the lift in restrictions is likely to see the New Zealand economy contract by approximately 5% y/y versus previous estimates of 7%.

The New Zealand dollar regained losses in offshore markets overnight and opens this morning at 0.6755. We expect support levels to hold on moves approaching 0.6680, while any upward push will likely meet resistance at the 68 US cent handle.

Key Movers

Equities were under pressure again dragging risk-based currencies with it. Tech stocks were the main catalyst for falls as the Nasdaq shed 1.48% overnight and the S&P 500 was down 0.85%. Investors sold on the lack of further QE plan updates by the Federal Reserve in the latest FOMC statement released on Thursday morning.

The US Dollar index was lower overnight (-0.2%) as a number of economic releases in the United States did little to move the needle in currency markets. Unemployment claims came in slightly below expectations as 860,000 American Citizens filed for first time claims and represents a modest shift lower. The Philly Fed Manufacturing Index grew at a slightly higher pace in September despite falling from 17.2 in August to 15 this month. The positive reading suggests that market conditions are slightly improving.

Across the Atlantic, the Bank of England also held their latest Monetary meeting, leaving interest rates at record lows as expected at 0.1%. The Great British Pound fell initially a full cent to 1.2865 as policy makers noted they would consider all options including negative interest rates in the future to combat uncertainty due to COVID-19. Eventual losses were stretched, and cable ended square at 1.2975.

On the docket today is the latest Retail Sales print in the United Kingdom overnight. Preliminary Consumer Sentiment and Inflation expectations are also due for release this evening in the United States.

Expected Ranges

NZD/USD: 0.6680 - 0.6800 ▲

NZD/AUD: 0.9200 - 0.9280 ▲

GBP/NZD: 1.9100 - 1.9400 ▼

NZD/EUR: 0.5670 - 0.5730 ▲

NZD/CAD: 0.8840 - 0.8910 ▲