Daily Currency Update

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Softening USD not enough to break back through 0.71

NZD - New Zealand Dollar

The New Zealand dollar again extended toward 0.71 US cents, buoyed by the surge in demand for commodities, the ongoing risk narrative and a slew of soft US macroeconomic indicators. Having opened marginally above 0.70, the NZD climbed steadily throughout the day as investors continued to perpetuate the current risk on mood amid speculation a US fiscal stimulus package will be available in the near-term. US treasury secretary Steven Mnuchin, bolstered hopes when he suggested Senate leader Mitch McConnell was now on board with his proposal, a proposal much nearer that proffered by Democrats and one more likely to see a break in the recent partisan impasse. Having extended through 0.7050, the NZD faltered on approach toward 0.71, marking intraday highs at 0.7098.

With little of note on the domestic docket, we expect the broader narrative will continue to drive NZD upside and sustain gains above 0.70 cents.

Key Movers

The US dollar was again on the backfoot through trade on Thursday, suffering losses against most major counterparts outside the British pound. Jobless claims unexpectedly rose to a 3 month high, well above market estimates and another signal the labour market is beginning to crack under the pressure of the latest economic retracement. The Coronavirus continues to wreak havoc across the US, with north of 200,000 infections and 3,000 deaths now a daily norm. Despite hopes a vaccine will facilitate a return to normal, a widespread program of immunisation won’t be available until Q2 next year, raising expectations for extensions in fiscal support and a long run period of accommodative monetary policy.

The Great British pound was the worst performer through trade on Thursday, sliding back below 1.33 against the greenback amid fears a no deal Brexit is now a reality. Boris Johnson met with European Commission President Von Der Leyen in brussels on Wednesday evening, a meeting that yielded little in the way of compromise. Key sticking points mean the EU and UK remain at loggerheads and with the deadline extended into the end of the weekend markets began to prepare for the real likelihood a deal may not be struck. Despite the political posturing, the market still anticipate at least a partial deal will be reached, given the vested interests of all parties. This leaves the door open to a sharp correction if a deal cannot be struck before the midnight bell, signaling the end of what has been a testing and trying 2020.

The euro burst back through 1.21 amid broader US dollar weakness and an extension in ECB monetary policy. Largarde announced an expansion in the banks Pandemic Purchase Programme and an extension into 2022. The extended timeline goes beyond market expectations, yet offered little in the way of market reaction. Investors absorbed the news with little fanfare, perhaps anticipating the Bank would look to issue an aggressive and proactive platform of support amid the worst of the pandemic. Having tested 1.2160, the euro opens marginally lower at 1.2140.

Expected Ranges

NZD/USD: 0.6980 - 0.7120 ▲

NZD/EUR: 0.5780 - 0.5880 ▲

GBP/NZD: 1.8580 - 1.9120 ▼

NZD/AUD: 0.9360 - 0.9505 ▼

NZD/CAD: 0.8980 - 0.9090 ▲