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Kiwi dollar falls from a 3.5-year high on Thursday

NZD - New Zealand Dollar

The New Zealand dollar closed the week down around 2% on Friday amidst falls in commodity prices and a broader risk-off selloff. Early Friday morning we saw US 10-year Treasury yield’s break above 1.5%, triggering a wave of stop-losses that briefly pushed the yield to as high as 1.6%. The Kiwi which traded above 0.7450 on Thursday night (its highest level since April 2018), finished the week down around 0.7230. On Friday Reserve Bank Governor Adrian Orr said he remained only focused on maintaining low and stable consumer price inflation and contributing to maximum sustainable employment, as recently outlined in our Monetary Policy Statement. Over the weekend has been the discovery of two new Covid-19 community cases in Auckland, which has led the government to move Auckland to a Level 3 lockdown for a week while the rest of the country remains up to Level 2.

A quiet week ahead in New Zealand on the release front. On Tuesday we will see the release of Quarterly Overseas Trade Index. On Wednesday we will see the release of monthly ANZ Commodity Prices and Building consents. However, all eyes will be on Thursday’s RBNZ speech on “The Future of Monetary Policy.” from the Governor Adrian Orr. From a technical perspective, the NZD/USD pair is currently trading at 0.7219. We continue to expect support to hold on moves approaching 0.7201 while now any upward push will likely meet resistance around 0.7389.

Key Movers

On Friday in the US we saw long-term US Treasury yields soar (1.4%) while Bonds yields fell in anticipation of higher inflation and prospects for a stimulus boosting and increased spending. The Greenback was stronger across the board on Friday, gaining 0.7%-0.8% in index terms. The market has already priced in US President Joe Biden’s $1.9 trillion stimulus package, while US Federal Reserve head Jerome Powell reiterated that quantitative easing is here to stay. On the release front on Friday US Durable Goods Orders surged 3.4% in January, higher than expected (1.1%). In the week ending February 20, the advance figure for seasonally adjusted initial jobless claims was 730,000, a decrease of 111,000 from the previous week's revised level of 841,000.

Looking ahead this week and on Monday it all starts with the release of US ISM Manufacturing PMI which is forecast to come in at 58.6, while the PMI services index will be released on Wednesday which is expected at 58.5. However, all eyes this week will be on Wednesday’s US employment-related data which will take centre stage. The report is expected to show that the private sector added 125K in the month of February, after gaining 174K in the previous month. On Friday the US will publish Nonfarm Payroll report for the month of February which the market is forecasting an increase in job creation of around 110K and an unemployment rate of 6.4%.

Expected Ranges

NZD/USD: 0.7100 - 0.7300 ▼

NZD/EUR: 0.5900 - 0.6100 ▼

GBP/NZD: 1.9100 - 1.9300 ▲

NZD/AUD: 1.0500 - 1.0700 ▲

NZD/CAD: 0.9050 - 0.9250 ▼