Political tensions weigh on the New Zealand dollar
Monday 27 July, 2020
Daily Currency UpdateThe NZD finished the week higher as risk sensitive currencies moved in positive fashion. The Kiwi soared through 66 US cents on Tuesday evening for a retest of 2020 highs set in January this year of 0.6680 against the Greenback.
Multiple fiscal policy approvals by both the Australian Government and European Union leaders provided the catalyst for the local currency to continue its bullish momentum. Risk reversals were seen on Friday following a poor US jobless claims print on Thursday evening before news that China ordered the US to shut its consulate in Chengdu as tensions between the two countries linger. Despite falling to intraday lows of 0.6615, the NZD/USD pair finished the week higher at 0.6638.
The NZD opens this morning at 0.6630 with little domestic news on the agenda this week. We expect support levels to hold on moves approaching 0.6580, while any upward push will likely meet resistance at 67 US cents.
Key MoversThe USD continued its dive this week, descending another 0.5% on Friday and nearly 2% on the week as investors flocked to the Japanese Yen on news that tensions had once again increased between the United States and China. Both sides ordered closures of consulates in their respective currencies sparking a sell off for the worlds most traded currency. The USD Index (DXY) which measures a basket of currencies against the Greenback fell from 96.01 on the Monday open to 94.35 on the weekly close.
The Euro soared to a 21-month high this week as it was bolstered by the announcement by EU leaders that they had reached agreeable terms to its €750 billion recovery fund to support implications of COVID-19 on the economy. Eventual highs were seen on the EUR/USD cross of 1.1658 following a number of positive Manufacturing and Services PMI numbers from both France and Germany. The single unit currency eventually gained 2% on the week.
As we look to this week the headline news will be the release of the latest Federal Reserve Bank interest rate decision where it is widely expected rates will remain at record lows. More importantly it is likely that market participants will be eager to see the release of the FOMC statement where it is expected the Fed will take more of a dovish tone given the economic struggles at present in the United States and globally.
- NZD/USD: 0.6600 - 0.6700 ▼
- NZD/AUD: 0.9300 - 0.9380 ▲
- GBP/NZD: 1.9000 - 1.9400 ▲
- NZD/EUR: 0.5660 - 0.5740 ▼
- NZD/CAD: 0.8880 - 0.8950 ▲