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NZD/USD testing 0.69 after touching multi-month highs

NZD - New Zealand Dollar

The overnight session saw the New Zealand Dollar fall slightly against the greenback despite upbeat global equity markets. Having initially soared to 0.6904 following the RBNZ, the New Zealand Dollar has fallen back below the key 0.6900 handle to settle this morning around 0.6870. The New Zealand Dollar outperformed the Australian Dollar yesterday, ultimately forcing the AUD/NZD cross lower to 1.0572, representing a 4-month low.

Recapping yesterday’s RBNZ decision, the central bank provided further stimulus in the form of the Funding for Lending Program. The program, which aims to lower the cost of funding for domestic banks was largely in line with market expectations. A core takeaway from the meeting however was the central bank’s modelling which pointed to a much stronger domestic economy than previously expected. This reduces the probability the RBNZ will be forced to adopt negative cash rates and provoked a significant market reaction as speculative trades based on negative future rates were unwound.

Looking to the day ahead, we will get New Zealand net migration data, which will obviously remain subdued due to the lockdowns before focus will shift offshore. In Australia, we will get inflation expectations from the Melbourne institute, Industrial production data out of the Eurozone, UK trade balance and GDP data and finally US October CPI is due.

Having breached 0.6900 briefly, traders will be looking for a consolidation above this level before moves to the 2019 peak at 0.6940 are considered. On the downside, clear supports are at the 0.6800 and the October high of 0.6725

Key Movers

The overnight session was relatively quiet in global markets as the US was closed for Veterans Day. Global equities however did continue their vaccine induced rally despite an uptick in cases in the US and Europe. The S&P500 rallied 0.8% as tech stocks surged. As we touched on above, despite the positive sentiment, the USD index was 0.3% higher on the day after a few weeks of weakness.

In Europe, we heard from ECB president Lagarde who reiterated that the alternative monetary policy measures of emergency bond purchases and long-term loans are expected to retain their importance over the coming years. This is consistent with the market’s view that the ECB prefers not to lower their already negative cash rate further.

Expected Ranges

NZD/USD: 0.6800 - 0.6940 ▲

NZD/EUR: 0.5750 - 0.5900 ▲

GBP/NZD: 1.9100 – 1.9450 ▼

AUD/NZD: 1.0550 - 1.0680 ▼

NZD/CAD: 0.8880 - 0.8900 ▲