Kiwi tracks lower as demand for risk evaporates
Friday 21 February, 2020
Daily Currency UpdateNZD - New Zealand DollarThe New Zealand dollar tracked lower through trade on Thursday, falling nearly one percent and touching lows at 0.6335. With little of note driving direction on the domestic macroeconomic docket risk off trade and softness across commodity driven assets and currencies forced the NZD lower and drove broader flows. While the spread of the coronavirus slowed in China, the pace of proliferation in South Korea, Japan and Singapore raised fresh concerns the virus will remain unchecked for months to come and will have a larger than estimated impact on global economic performance. Short term direction remains affixed to risk off plays driven by coronavirus headlines as domestic attentions turn to commentary form RBNZ governor Orr. Orr is expected to address the current state of the economy and could hint to future monetary policy guidance. While we do not expect Governor Orr to deviate greatly from the recent post monetary policy meeting statement, any dovish undertone could add additional downside pressure on the NZD through trade on Friday.
Key MoversThe US Dollar advance continued through trade on Thursday, touching three-year highs when valued against a basket of major currency counterparts. Sustained strength across key macroeconomic indicators and an economy that is largely immune to the threats of the coronavirus has helped fuel demand for the world’s base currency as a key safe haven play. The Euro depreciation continued Thursday, posting intraday lows at 1.0780 driven by a persistent carry trade play and sustained softness across key macroeconomic indicators. The combined unit has struggled against the US dollar throughout the year to date as the mismatch between key major economic data sets highlights the gap in expected monetary policy programs moving through the year ahead. Having tumbled over 3% through the year to date attentions now turn to key services and manufacturing PMI data prints as markers guiding direction into the weekly close. Despite an uptick in domestic retail sales the Great British Pound fell to intraday lows at 1.2849 through trade yesterday. Thursday’s downturn marks a 1.4% depreciation through the week thus far and sees sterling unwind all last weeks gains as mounting expectations for increased fiscal stimulus have abated and the likelihood of a Bank of England rate cut before year end gained further traction. Futures are now pricing an 80% chance of a rate cut by December, up from 69% on Wednesday.
- NZD/USD: 0.6280 - 0.6410 ▼
- NZD/EUR: 0.5850 - 0.5620 ▼
- GBP/NZD: 2.0210 - 2.0420 ▲
- NZD/AUD: 0.9530 - 0.9580 ▲
- NZD/CAD: 0.8350 - 0.8450 ▼