NZD - New Zealand Dollar
The NZD slipped back below 0.69 US cents overnight giving up intraday and near two year highs at 0.6920 as investors adopted a more cautious tone. Optimism following Moderna’s vaccine announcement faded overnight, forcing rates, equities and risk assets lower, while dragging the NZD toward lows at 0.6875. Covid-19 cases continue to increase exponentially in the US, while Europe’s lockdown measures have yielded only a marginal slowdown, creating an ever increasing short-term burden and growth retracement. While recent vaccine news is incredibly positive, a widespread global roll out is unlikely to be completed until H2 2021, opening the door for a deeper recession and longer recovery period. The NZD continues to test new highs as markets readjust monetary policy expectations, however, we expect top side gains beyond 0.69 and approaching 0.70 will be hard won ahead of full scale immunisation. The Kiwi should remain well supported by a weaker USD, with our year end range revised from 0.64-0.68 up to 0.66 – 0.70.
The US dollar came under sustained pressure through trade on Tuesday as a worrying COVID-19 outlook and optimism for a covid-19 vaccine forced investors toward other assets. The dollar marked a fresh one week low as the euro, pound, Swiss franc and yen all enjoyed gains, while the Chinese yuan marked a near 30 month high. New coronavirus infections continue to increase at an exponential rate in the US with the 7 day rolling average now above 150,000, a horrifying milestone that will result in over 1 million new infections this week. With little scope for change in social distancing protocol and a next to no communication or cooperation from the White House with the Biden/Harris pandemic team, the cost and toll of the pandemic will only deepen in the months ahead.
The Great British pound outperformed Tuesday, buoyed by reports a UK/EU trade deal could be brokered as early as next week. Sterling touched 1.3270 following commentary from top UK negotiators that suggested they had briefed Boris Johnson on the success of recent talks and expect a trade deal will be reached. While fishing rights and red tape still remain a stumbling block, we expect at least a partial trade agreement will be signed, prompting another GBP push higher.
Attentions today remain with the pandemic and broader market sentiment with little of note on today’s macroeconomic docket.
0.6820 - 0.6930 ▼NZD/EUR:
0.5710 - 0.5830 ▼GBP/NZD:
1.9080 - 1.9420 ▲NZD/AUD:
0.9390 - 0.9440 ▼NZD/CAD:
0.8990 - 0.9050 ▼