Daily Currency Update

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Kiwi makes new 2 year high before market sentiment falters

NZD - New Zealand Dollar

The New Zealand Dollar opens marginally lower this morning having trended with recent ranges through much of Monday. Risk assets received a boost on hopes a no-deal Brexit will be avoided and the promise a US fiscal stimulus program is imminent. The S&P 500 and Nasdaq consolidated last weeks gains extending a further two tenths of a percent in the early part of the day, dragging the NZD through 0.71 to intraday and 2-year highs at 0.7120. With the risk narrative continuing to drive gains the NZD bounced between 0.7105 and 0.7120 through the middle of the overnight session before reports London and New York will enter tightened stage 3 restrictions dented market sentiment. The UK and the US are among the first to approve Pfizer’s COVID19 vaccine and begin widespread immunisation programs and the announcement of increasing social distancing controls serve as a stark reminder we are still a long way from a return to normal. The NZD dropped back below 0.71 to mark intraday lows at 0.7176 and currently buys 0.7081 at time of writing.

Attentions today remain with the risk narrative with nothing of note on the macroeconomic docket. We anticipate the long run USD downturn and risk narrative will continue to fuel NZD gains as the string of higher highs and higher lows continue. We are watching resistance on moves approaching the overnight high with a break above 0.7120 signaling another possible extension and move nearer 0.72.

Key Movers

Moves within currency markets were relatively modest through trade on Monday as the risk narrative continues to bubble along amid a lack of any new or meaningful headlines. Reports a no- deal Brexit was still “possible” helped fuel GBP gains and saw Sterling erase last weeks losses following an extension in negotiations. Signs both parties are willing to compromise after intensive talks at the weekend elevated hopes policy makers will not allow the end of year deadline to arrive without at least a partial trade agreement. The Pound jumped back through 1.33 and extended toward intraday highs at 1.3450 as the USD made new 30 month lows. The dollar index cratered in the early part of the overnight session, driven lower by gains across risk assets and an uptick in both the GBP and EUR. Having marked a new low the USD then found support as investors consolidated gains on reports new lock down measures would be introduced in New York and London. Sterling gave up much of its early gains and shifted back to 1.3325 while the Euro assault on 1.22 fell short.

Attentions remain affixed to key risk events and headlines with Brexit and US fiscal stimulus continuing to drive the broader narrative.

Expected Ranges

NZD/USD: 0.7020 - 0.7130 ▼

NZD/EUR: 0.5790 - 0.5860 ▼

GBP/NZD: 1.8680 - 1.8920 ▲

NZD/AUD: 0.9350 - 0.9450 ▲

NZD/CAD: 0.9010 - 0.9080 ▼