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Kiwi struggles to follow lead of equities, giving up 0.66 US cents

NZD - New Zealand Dollar

The New Zealand dollar underperformed through trade on Wednesday, failing to capitalise on improved market sentiment. Having been forced back below 0.66 US cents following the breakdown in US fiscal stimulus talks the Kiwi struggled to mount any meaningful rebound instead drifting toward 0.6570. Without an obvious catalyst it seems markets were simply reluctant to see the Kiwi dragged higher in the wake of improving risk demand and an uptick across equities and growth currencies. Instead investors consolidated positions, taking profit having given up last weeks uptick.

Attentions and fortunes remain affixed to the broader risk narrative while the upcoming election could play a significant role in shaping fiscal stimulus plans leading into 2021. With little of note on the docket today we anticipate the NZS should find support in improving sentiment. An uptick in business conditions could help push the Kiwi back through 0.66 with resistance at 0.6650 looming as a tricky barrier to break.

Key Movers

The US dollar, JPY and CHF all led losses across major currencies through trade on Wednesday as the mood across financial markets improved amid hopes at least some US fiscal stimulus would be made available before the election. Another round of $1,200 cheques are set to be delivered to embattled American households in a bid to revive the consumer led economy, while the President intimated targeted relief to small businesses and the decimated airline industry had Republican support. The dollar index fell 0.2% nearing Tuesday’s two week low with support for the worlds base unit continuing to eb and flow in response to fluctuations in risk demand.

The Great British Pound remains vulnerable to further volatility in the lead up to the all-important October 15 EU summit. The summit has been earmarked as the self-imposed deadline for striking a trade deal and avoiding a hard Brexit and with negotiations still bogged down by a failure to compromise on Fishing rights and State Aid an 11th hour deal is becoming increasingly more likely. While the market is still holding out hope a deal can be struck Britain has made it clear it is prepared to walk away from the table while the EU is not prepared to make compromises ahead of the summit. Failure to reach an agreement will likely see all confidence in the GBP evaporate, prompt a run on Sterling and a sharp correction.

Expected Ranges

NZD/USD: 0.6530 - 0.6650 ▼

NZD/EUR: 0.5550 - 0.5620 ▼

GBP/NZD: 1.9480 - 1.9780 ▲

NZD/AUD: 0.9180 - 0.9290 ▼

NZD/CAD: 0.8680 - 0.8790 ▼