Daily Currency Update

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Kiwi maintains narrow range as markets zero in on US election

NZD - New Zealand Dollar

The New Zealand maintained a narrow trading band through Monday bouncing off supports at 0.6590 and creeping higher in overnight trade. Last weeks risk off undercurrent spilled into trade on Monday morning as the UK, France, Germany, Austria and Belgium all announced new lock down measures at the weekend. The promise of month-long lockdown rules have dashed hopes the Q3 GDP recovery will continue through the latter half of the year, forcing investors to adjust longer term growth expectations. Having bounced off supports the NZD extended back beyond 0.66 to mark intraday highs at 0.6635 as equities recovered some of last weeks losses and investors adjusted positions leading into the US election. The race for the White House remains our primary focus and overshadow other key policy and economic data sets. Polls suggest Biden and the democrats will sweep both the House and the Senate but data across key swings states suggests his lead has narrowed, escalating concerns for election day unrest and a protracted and contested ballot count. With record numbers of pre-poll ballots already lodged a clear and accurate result will likely take longer than usual and we may not have an official winner until Thursday or Friday. The longer it takes for a clear leader to emerge the greater the short-term volatility, with the NZD responding to fluctuations in risk sentiment.

Key Movers

Moves across currency markets were broadly muted through trade on Monday with the dollar index flat on the day, holding onto most of last weeks gains. The sell off across equities last week has largely failed to permeate currency markets as investors sideline bets ahead of this weeks US election. Biden maintains a comfortable lead in national polls, however the race remains much closer across key swing States. With a record number of ballots already lodged and the large swathes of voters expected to hit the polls on Tuesday it is likely the count will take longer than we are accustomed to. It is possible a clear winner does not emerge for at least 48-72 hours, opening the door to a contested and protracted legal battle. With President Trump still refusing to commit to a peaceful transference of power markets are simply hoping for a definitive outcome for either side so as to avoid short term volatility and uncertainty.

The Euro came under added pressure on open as new lock down measures were announce across the continent at the weekend. Investors ignored last week uptick in GDP numbers as month long shutdowns have all but dashed hopes the recovery will continue through Q4. Europe is struggling to contain the 2nd wave of COVID 19 infections and calls for longer and extended lockdown measures have grown in recent days. With many governments refusing to introduce the same widescale and sweeping lockdown measures of March and April there are fears the new measures will do nothing but slow the rate of spread and perhaps ease the immediate burden on the continents hospitals. The single currency has held above 1.16 as investors sideline bets until after the election. With the macroeconomic outlook so uncertain we expect corrections in Euro value through the days and weeks ahead as we move past todays key risk event.

Expected Ranges

NZD/USD: 0.6580 - 0.6690 ▲

NZD/EUR: 0.5580 - 0.5720 ▲

GBP/NZD: 1.9180 - 1.9820 ▼

NZD/AUD: 0.9330 - 0.9450 ▲

NZD/CAD: 0.8680 - 0.8820 ▼