NZD movement this week could be largely governed by investor risk appetite and continuing tariff negotiations; the USD is up slightly over the week with the index breaking back above 90.00; NZ quarterly GDP prints Thursday

By Neven Fisher*:

NZ to seek an exemption to the Steel tariffs. The EU’s top trade officials say they have no clarity on President Trump’s tariff plans, as his decision to slam hefty tariffs on steel and aluminum builds pressure. Trump posted on twitter- “The European Union, wonderful countries who treat the US very badly on trade, are complaining about tariffs on Steel and Aluminum”, If they drop their horrific barriers and tariffs on US products going in, we will likewise drop ours”. Playground behaviour one would think?!.

The President is set to meet Korean dictator Kim Jong Un with many US national security experts suggesting this could end up being a big mistake given the two personalities.

In other US led news the Florida Governor has signed off on new gun laws including raising the minimum age to purchase a gun to 21 and extending the waiting period to 3 days. This is the boldest laws made in the state in decades and comes just 3 weeks after the Parklands school shootings. We await other states to follow suite with Illinois and Vermont thinking about with the NRA in damage control filing a lawsuit immediately after the Governor’s announcement.

The US Dollar is up slightly over the week with the index breaking back above 90.00. This week will be hard to read as a “risk on” or “risk off” market so direction will be tough accordingly. If equities continue north this could be a sure bet high yielding risk currencies such as the Australian Dollar (AUD), New Zealand Dollar (NZD) and the Canadian Dollar could trade well this week.

There are continued calls for a second Brexit ballot. Brexit polls are still close with “remain” still slightly ahead by 51% to 49%, the problem is as things draw closer to the actual date those that have not chosen to vote or the undecided bunch would now more than likely vote to stay/remain than leave, this suggests that any second ballot outcome would depend largely on who actually votes. NZ quarterly GDP prints Thursday.

Major Announcements last week:

  • US ISM Non-Manufacturing PMI prints 59.5, 58.9 expected
  • AUD Current Account -14B against -12.3B expected
  • RBA retain Cash rate at 1.50%
  • US NOn-Farm Payroll prints 235k over 199k expectation
  • US Unemployment rate higher to 5.8% on 5.9% expectation
  • Canada keeps Cash rate at 1.25%
  • European Central Bank keeps rates on hold at record low.
  • US trade talks continue to dominate market news..

NZD/USD

The New Zealand Dollar (NZD) gained further support over the later stages of the week extending gains over the US Dollar (USD) to 0.7310, where it currently sits. A break higher may see the NZD take a peek at the 0.7430 band, the pre July 2017 level. US Non-Farm Payroll printed well creating risk appetite with investors the NZD receiving full benefit as buyers purchased NZD into the tail end of the US session. Equities were also higher with the DOW up over 1.5% at the close. The New Zealand Dollar movement this week could be largely governed by investor risk appetite and continuing tariff negotiations.

DIRECT FX Current level Support Resistance Last wk range
NZD/USD 0.7304 0.7245 0.7320 0.7231-0.7323

NZD/AUD (AUD/NZD)

The Australian Dollar (AUD) made ground against the New Zealand Dollar (NZD) breaking back below 0.9300 (1.0660) at the weekly close after trading as high as 0.9380 midweek. RBA governor Bollock speaks Tuesday this week, perhaps hinting at future policy shifts and clues on the wellbeing of the Australian Economy. His comments will be important this week with a lack of other key fundamental Australian drivers. The pair is still well supported above 0.9240 and could make a surge again for 0.9380 if quarterly NZ GDP prints well, the long-term rally from the low of 0.8865 in October still solidly in place.

DIRECT FX Current level Support Resistance Last wk range
NZD / AUD 0.9266 0.9237 0.9302 0.9259-0.9366
AUD / NZD 1.0790 1.0750 1.0825 1.0677-1.0801

NZD/GBP (GBP/NZD)

The British Pound (GBP) has stayed within a tight range over the course of last week against the New Zealand Dollar (NZD) with 0.5285 (1.8923) the high and 0.5216 (1.9171) the low. With a lack of data released lately investors have looked to news wires over the economic calendar for meaningful information. This week remains the same with only the UK budget which releases Wednesday. Technically the pair may look to break its sideways movement and test 0.5367 (1.8632) the previous 9 Jan high if Brexit related publications prints negatively.

DIRECT FX Current level Support Resistance Last wk range
NZD / GBP 0.5255 0.5189 0.5282 0.5220-0.5284
GBP / NZD 1.9029 1.8930 1.9270 1.8926-1.9157

 NZD/CAD

The New Zealand Dollar (NZD) continues to make gains against the Canadian Dollar (CAD) punching to a new high of 0.9440 mid last week before easing back to 0.9350 to close just above the weekly open of 0.9325. Despite seeing softer oil prices the NZD/CAD made up a little ground earlier this week trading back to 0.9330 before the RBNZ governor Grant Spencer’s speech around Macro-prudential policy pushed the NZD up to 0.9380. NZ GDP quarterly figures print Thursday and should print well giving the New Zealand Dollar (NZD) further support to perhaps push past 0.9445

DIRECT FX Current level Support Resistance Last wk range
NZD / CAD 0.9380 0.9325 0.9450 0.9321-0.9446

NZD/EURO (EURO/NZD)

The New Zealand Dollar closed the week in a positive mood against the EURO (EUR) pushing through to 0.5940 (1.6838) during a risk on market late during the NY session Friday. The EUR has made gains against the New Zealand Dollar (NZD) during light trading Monday pushing lower to 0.5913 (1.6912). A quiet week for data publications with only Draghi speaking on Wednesday and NZ quarterly GDP Thursday. We expect further swings over the week in the pair possibly back to last week low of 0.5860 (1.7070) if further volatility continues.

DIRECT FX Current level Support Resistance Last wk range
NZD/EUR 0.5920 0.5837 0.5980 0.5838-0.5943
EUR/NZD 1.6892 1.6722 1.7120 1.6827-1.7129

NZD/YEN

The New Zealand Dollar (NZD) is higher against the Japanese Yen (JPY) Monday pushing back to 78.10. Breaking the bearish trend line from the high of 81.00 in January. On Thursday the New Zealand Dollar (NZD) rebounded off the previous low of 75.90 on BoJ governor Kuroda comments as investors saw value in the NZD as risk came back to the table. As previously commented we still expect a continued reversal higher back to 79.00, with another quiet week for Japan Data, local NZ data and risk appetite should govern movement.

DIRECT FX Current level Support Resistance Last wk range
NZD / YEN 77.69 76.00 79.12 76.68-78.16

AUD/USD

The Australian Dollar (AUD) is sharply higher against the US Dollar (USD) climbing back to 0.7850 at the weekly close after it rallied hard from 0.7800 earlier when Non-Farm Payroll figures printed better than expectation. Trump tariff negotiations played a part as well with risk back at the table. Equities also traded higher on the day the DOW and NASDAQ over 1%. This week the Australian Dollar eyes 0.8000 again but may meet resistance at 0.7880 if Today’s NAB business confidence doesn’t offer further momentum.

DIRECT FX Current level Support Resistance Last wk range
AUD / USD 0.7885 0.7830 0.7930 0.7757-0.7884

AUD/GBP (GBP/AUD) 

The Australian Dollar (AUD) continued its run against the British Pound (GBP) Friday rallying through to 0.5670 (1.7632) late in the NY trading session. As the US Dollar slipped out of favour in a risk on market Friday stemming from news of progress with trade tariffs, the markets bought the Australian Dollar (AUD) finishing the week on its high. Earlier this week the GBP has made a comeback reversing some of last week’s losses pushing the pair back to 0.5660 (1.7670). The RBA assistant governor Bullock speaks later today on matters around interest rates and the general state of the Australian economy the only economic release this week of note.

DIRECT FX Current level Support Resistance Last wk range
AUD / GBP 0.5671 0.5600 0.5682 0.5593-0.5682
GBP / AUD 1.7633 1.7600 1.7850 1.7600-1.7878

AUD/EURO (EURO/AUD)

The Australian Dollar (AUD) made a strong comeback late last week against the EURO (EUR) in risk on markets buoyed by calmer investors after Trump’s comments regarding tariffs. The Aussie (AUD) pushed all the way back to massive resistance levels of 0.6400 (1.5620), the pair has eerily rejected this level over 5 times over the past month. The RBA’s Bullock speaks today along with NAB Business confidence should give the Aussie (AUD) further momentum leading into ECB Draghi’s speech tomorrow. Watch for AUD/EUR to travel back to 0.6330 (1.5800) this week.

DIRECT FX Current level Support Resistance Last wk range
AUD/EUR 0.6388 0.6277 0.6410 0.6259-0.6401
EUR/AUD 1.5655 1.5600 1.5930 1.5624-1.5976

AUD/YEN

The Australian Dollar (AUD) pushed higher over the week against the Japanese Yen (JPY) coming from around 82.00 at the open it rallied to a high of 84.00 in a market where investors had plenty of appetite for risk. Breaking the downtrend from 88.70 over the week the Aussie (AUD) looks to regain prior losses comfortably trading through the 50 day moving average to 83.65 Tuesday- perhaps on its way to medium term resistance level of 84.20. The RBA governor Bullock and Debelle speak later in the week.

DIRECT FX Current level Support Resistance Last wk range
AUD/YEN 83.80 81.50 84.90 82.03-84.10

AUD/CAD

The Canadian Dollar (CAD) has traded lower against the Australian Dollar (AUD) over the week, the Aussie (AUD) the beneficiary of choppy price action amid a risk on market and intl trade talks involving tariffs and NAFTA weigh on the CAD. The AUD has opened strong Monday pushing up to 1.0110 from 1.0050 and looks to break prior resistance of 1.0135 last week’s high. Its thin air through to 1.0350 with the BOC governor Poloz speaking Wednesday morning styled “today’s labour market and the future of work”. NAFTA talks continue to strain the Canadian Dollar, it may continue to weaken in the near term until trade negotiations are finalised.

DIRECT FX Current level Support Resistance Last wk range
AUD / CAD 1.0120 1.0030 1.0200 1.0020-1.0130

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Market commentary:

NZ to seek an exemption to the Steel tariffs. The EU’s top trade officials say they have no clarity on President Trump’s tariff plans, as his decision to slam hefty tariffs on steel and aluminum builds pressure. Trump posted on twitter- “The European Union, wonderful countries who treat the US very badly on trade, are complaining about tariffs on Steel and Aluminum”, If they drop their horrific barriers and tariffs on US products going in, we will likewise drop ours”. Playground behaviour one would think?!.

The President is set to meet Korean dictator Kim Jong Un with many US national security experts suggesting this could end up being a big mistake given the two personalities.

In other US led news the Florida Governor has signed off on new gun laws including raising the minimum age to purchase a gun to 21 and extending the waiting period to 3 days. This is the boldest laws made in the state in decades and comes just 3 weeks after the Parklands school shootings. We await other states to follow suite with Illinois and Vermont thinking about with the NRA in damage control filing a lawsuit immediately after the Governor’s announcement.

The US Dollar is up slightly over the week with the index breaking back above 90.00. This week will be hard to read as a “risk on” or “risk off” market so direction will be tough accordingly. If equities continue north this could be a sure bet high yielding risk currencies such as the Australian Dollar (AUD), New Zealand Dollar (NZD) and the Canadian Dollar could trade well this week.

There are continued calls for a second Brexit ballot. Brexit polls are still close with “remain” still slightly ahead by 51% to 49%, the problem is as things draw closer to the actual date those that have not chosen to vote or the undecided bunch would now more than likely vote to stay/remain than leave, this suggests that any second ballot outcome would depend largely on who actually votes. NZ quarterly GDP prints Thursday.

Australia

The Australian Dollar (AUD) finished the week well pushing back to 0.7850 with offshore news dominating movement. US Non-Farm Payroll boosted risk currencies on better than expected figures while the US Unemployment figure remained at 4.1% This week is a quiet week for the Australian Dollar with limited data – RBA Assistant Governor Kent and Debelle speak Wednesday and Friday. Last week the RBA left the cash rate unchanged at a record 1.5% and they are not in any hurry to raise the rates before they are ready- this could put added pressure on the AUD over the year as the US hike their cash rates as predicted. The Aussie Dollar sits higher on the Monday open eager to continue north against the US Dollar this week, the prior high of 0.7970 could enter play if risk appetite continues as buyers continue to buy up AUD.

New Zealand

The New Zealand Dollar (NZD) made ground over the later part of the week against its main rivals, risk appetite being the key as Non-Farm Payroll prints better than expected. US President Trump has reportedly accepted to meet with North Korea’s Kim Jong-Un Thursday taking the Trump administration by surprise by seemingly accepting without taking into consideration the risks involved. All attempts since 2003 to negotiate for disarmament have been unsuccessful when North Korea pulled the pin on the Nuclear Non-Proliferation Treaty (NPT)- the Word will certainly be watching when the summit takes place. Chris Liddell is picked to take over as Director of National Economic Council after Gary Cohn’s resignation last week, he comes to the roll after being highly regarded at Microsoft as CFO. This week NZ has Current Account, quarterly GDP and the Business Manufacturing Index. If things continue well for the NZD this week it may make a push for earlier year highs pf 0.7430 against the US Dollar and 0.9400 against the Australian Dollar (AUD)

United States

US Non-farm payroll released late last week showing wage growth with 313,000 people added to the workforce while wages slowed to 2.6%. The official unemployment rate is now 4.1% from 4.0%, the releases temporarily strengthened the greenback slightly against the major currencies but it quickly sagged into the weekly close. President Trump’s Tariffs were made official Thursday by the White House and has angered international markets, the European Union feeling the added pressure with allies wondering where they stand, even harbouring threats from his own party members to stop the tariffs through legislation. Trump decision to exempt Mexico and Canada are only if they can strike a deal with the US with NAFTA. Every other country will be required to negotiate a separate deal with the US which will take effect in two weeks. Chris Liddell the ex- kiwi businessman is tipped to be Trump’s new ‘Director of the National Economic Council” following Gary Cohn resignation last week based on Trump’s announcement of Tariffs which he strongly disagreed with. This week sees a busy week for the US with monthly CPI, Retail Sales and Building Permits. The US Dollar (USD) index currently sits just above the 90.00 mark up from last weeks close, we should continue to see further volatility.

Europe

The EURO (EUR) finished the week fairly uneventfully after earlier recouping small loses trading back to its weekly open of 1.2330 versus the US Dollar (USD) in risk on markets. Mario Draghi the European Central Bank president reiterated on Friday the need for accommodative monetary policy going forward and that the eurozone was moving into hawkish territory with quantitative easing while casually mentioning the need to resolve current trade tensions built up recently by President Trump. He has left the benchmark cash rate at 0.0% and confirmed he would continue to buy EUR 30B until the end of September or later if the need became apparent as a sustained inflation adjustment tactic. The Euro (EUR) has opened strong Monday and looks to push back to early march levels around 1.2450. Draghi speaks again on Wednesday the only significant item on the calendar this week.

United Kingdom

The British Pound (GBP) extended gains last week over its closest rivals. Manufacturing Production figures Friday printing worse than expected at 0.1% after 0.2% was expected but it never made a dent. The GBP has started the week on a good footing as reports surface that the UK and EU were closer to reaching a Brexit deal. The Pound (GBP) against the US Dollar (USD) trades around the 1.3900 area and looks for a break higher back to February’s high of 1.4140. Public opinion suggests holding a second referendum is the way to go but this wouldn’t matter as Theresa May had a majority in the house of commons and a party that was united in support of Brexit. The government budget is released this Wednesday.

Japan

The Japanese Yen suffered losses last week falling to USD Dollar (USD) strength throughout the week in volatile trading. Wednesday saw USD slide back to the weekly open of 105.45 before the US Dollar kicked back retracing its earlier gains taking the pair back to just shy of 107.00 at the weekly close. Bank of Japan’s (BoJ’s) governor Kuroda said Friday it won’t scale back its aggressive monetary policy program before inflation reaches its target of 2% in an attempt to soften the expectations of earlier rate increases. The BoJ would more than likely push the projections for rate increases back to late 2019. The long-term low of 105.25 could be safe this week as the US Dollar (USD) eyes 108.00

Canada

The greenback (USD) continues to post new highs against the Canadian Dollar (CAD) trading through the 2nd of February high at 1.2800 late last week before easing lower.  With Non- Farm Payroll printing much better than the predicted figures Canadian Unemployment was largely ignored coming in lower at 5.8% as opposed to 5.9%. President Trump continues to wear down his rivals saying recently that separate talks with Canada and Mexico would resume, the problem with this is that it has not really gained any traction, so he has threatened to ditch NAFTA, which won’t happen. The Canadian governor Stephen Poloz is due to make a speech Tuesday night of which will be closely analysed for further clues as to monetary policy. The market isn’t pricing in a rate increase until July as the RBC expects to raise a further 2 times before year end. Markets have not yet priced in such events for the Canadian dollar- watch for a CAD revival short to medium term especially if Oil continues to go higher.

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