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New Zealand dollar falls as equities close in the red

NZD - New Zealand Dollar

The New Zealand Dollar could not push through the 68 US cent handle on Friday evening as profit taking was seen at the close of the domestic session. Equity markets in the United States plunged once again on Friday evening as they headed into their third successive week of losses. Driven by a weakness in tech stocks, The NZD/USD fell from a monthly high of 0.6798 to 0.6749 on the market close.

A poor GDP print for the 2nd quarter of 2020 was recorded last week where the impact of COVID-19 saw a -12.2% contraction and its worst on record. All eyes this week will be on the latest RBNZ cash rate decision on Wednesday where it is widely expected that interest rates will remain at record lows of 0.25%. More interestingly will be if there is any change in the RBNZ rate statement for updated guidance of potential negative interest rates in 2021 to stimulate the domestic economy.

The NZD opens this morning at 0.6760. We expect support levels to hold on moves approaching the 67 US cent handle, while any upward push will likely meet resistance at 0.6780.

Key Movers

Safe haven currencies were in favour on Friday evening as the Japanese Yen saw its fifth successive day gains against the greenback. A decline in equity markets, the Nasdaq (-1.2%) and Dow Jones (-0.70) meant the USD/JPY fell from 1.0610 to 1.0455 since last Monday and reached seven-week lows.

A fresh wave of COVID-19 cases in Europe look to have also taken the sting out of any potential recovery in markets as fresh lockdowns look to be put in force. Both Spain and the United Kingdom saw daily infection surge as governments look to contain cases with limiting gatherings and enforcing curfews.

The EUR/USD was little changed closing at 1.1837, while the Great British Pound fell by 0.47% to 1.2913 with plenty of news to digest. The potential for negative interest rates by the Bank of England and ongoing hopes for a Brexit agreement between the United Kingdom and Europe look set to heighten volatility for cable before the imposed negotiation deadlines by October 15th.

This week focuses on a number of speeches by Federal Reserve FOMC members including Fed Chairman Jerome Powell and Treasury Secretary Steven Mnuchin due to testify on the CARES Act before the House Financial Services Committee. A number of Manufacturing and Services PMI figures are also due for release in Europe, United Kingdom and the United States.

Expected Ranges

NZD/USD: 0.6700 - 0.6780 ▼

NZD/AUD: 0.9200 - 0.9300 ▲

GBP/NZD: 1.9000 - 1.9350 ▼

NZD/EUR: 0.5680 - 0.5730 ▼

NZD/CAD: 0.8900 - 0.9000 ▲