The Kiwi rides this week’s risk-on wave to a net positive performance, triggered by receding fears of an economic meltdown thanks to pledges of massive support from central banks and governments.
New Zealand Headlines and Economic data
- New Zealand to move to alert 4 lockdown for next four weeks – Jacinda Ardern says schools closed, essential services only
- Reserve Bank moves on QE – begins $30 billion bond buy up
- Early drop lower for the Kiwi on Monday, likely due to the continued negative risk sentiment fueled by the ongoing coronavirus pandemic and likely economic damage to the global economy. It’s also likely the the failure of the stimulus bill to pass the U.S. Senate added to market fears.
- It was a quick turn around in sentiment, though, during the U.S. session towards positive, likely sparked by a pledge from the Federal Reserve to support the markets with no limits, adding to the news of major stimulus moves from the Reserve Bank of New Zealand and Reserve Bank of Australia announced during the Asia session.
- New Zealand government announces $6.2B loan guarantees for SMEs
- New Zealand announces mortgage holiday, business finance support to cushion virus impact
- Positive global risk sentiment was on the rise through Wednesday to support the Kiwi, likely on the continue stream of pledges from governments and central banks along with the RBNZ’s actions mentioned above (e.g., ECB Intends to Be Major Buyer in Commercial Player Market, Canada doubles value of coronavirus stimulus package, etc.) to shield the world from an economic meltdown.
- New Zealand trade balance up from 414M NZD deficit to 594M NZD surplus
- NZ declares national emergency and prepares for lockdown – this news and expectations of an economic slowdown from a lockdown may have been the catalysts for the somewhat broad move lower in the Kiwi during the Wednesday trading session.
- The Kiwi turned higher against most of the majors during the Thursday session, likely on the continued rise in global risk sentiment, once again on more news of stimulus measures to support the global economy (e.g., ECB shakes off limits on new €750bn bond buying plan, U.S. Senate passes $2T disaster aid bill, South Korea to relax FX liquidity rules for banks, India cuts rates & unleashes $50B in stimulus, etc.)
- Risk sentiment soured a bit on Friday, possibly on traders fearing that the U.S. stimulus bill may hit a snag and on the continued acceleration of cases around the globe. The Kiwi actually held its ground well during this time frame, and rallied during the afternoon trading session on likely U.S. dollar weakness after the stimulus bill was later passed and signed by President Trump in the afternoon session.