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NZD begins recouping last weeks losses, testing 0.66

NZD - New Zealand Dollar

The New Zealand dollar capitalised on a broader US dollar correction through trade on Tuesday, buoyed by improved demand for risk and caution ahead of the first Presidential debate. Having tracked sideways through much of the domestic session the NZD pushed through resistance at 0.6560 to test 0.66, touching intraday highs at 0.6602. Having lost over 3% last week the NZD has bounced off lows and begun to recoup the sell off, yet remains vulnerable to a broader shift in the risk narrative. While there is renewed optimism a US fiscal support package will be agreed ahead of the election, the outlook for global growth remains clouded as new coronavirus infections across the US and Europe will inevitably lead to ongoing restrictions. While the local election looms our attentions remain with the wider global narrative. We expect the NZD will continue to drift between 0.64 and 0.68 responding to fluctuations in sentiment and ongoing COVID-19 developments. ANZ business confidence headlines the domestic docket, and we will be looking for continued improvement as a key marker in driving the domestic recovery.

Key Movers

The US dollar gave up recent gains through trade on Tuesday, drifting off near two-month highs as investors adjust position leading into the first debate in the race of the White House. Having enjoyed renewed demand through the last 2 weeks investors squared positions, capitalising on recent gains amid improvements in demand for risk. The two candidates are polar opposites pushing vastly different agenda’s and investors will be keenly attached to the prospects of both Biden and Trump. While investors sit back ahead of the debate improvements in broader market sentiment added further pressure on the world’s base currency. An uptick in domestic consumer confidence and a suggestion that a fiscal coronavirus aid package could be agreed by the end of the week helped fuel demand for risk, driving equities higher. The Dollar’s correlation with equity performance remains strong as sentiment continues to ebb and flow. With risk continuing to steer direction there is scope for added US upside leading into the election as shorts remain near decade highs.

The Pound gave up gains hard won through trade on Monday, following commentary for Bank of England Governor Andrew Bailey. Bailey warned the recovery may wane as new restrictions rob the rebound of momentum, hinting that a move to negative interest rates was not off the table. Britain suffered the largest hit to GDP production of any major economy through Q2 and is expected to remain near 10% weaker through Q3. Having given up moves above 1.29 sterling fell to 1.2836 before edging higher into this morning's open.

Expected Ranges

NZD/USD: 0.6530 - 0.6620 ▲

NZD/EUR: 0.5580 - 0.5650 ▼

GBP/NZD: 1.9220 - 1.9630 ▼

NZD/AUD: 0.9210 - 0.9305 ▼

NZD/CAD: 0.8730 - 0.8890 ▲