- NZD/USD holds in positive territory despite a rout in oil prices.
- The CRB Index fell to the lowest levels since 1999.
- Kiwi bounced strongly on yesterday’s confirmation that lockdown level 4 will end next week.
NZD/USD is trading at 0.6047 having travelled between a range of 0.6008 and 0.6091, holding a relatively tight spread considering the falls in the commodity space, pertaining to a collapse in oil prices.
Commodities falling, Kiwi supported on economic recovery hopes
The world economy is falling into a deep recession and the price of oil turned negative on Monday as sellers start paying to take it off their hands. Oversupply is now an enormous headwind, more on that here: Saudis mull applying oil cuts as soon as possible, time to buy oil?
Meanwhile, the CRB Index fell to the lowest levels since 1999 with economic activity halting around the globe. The New Zealand dollar is partly correlated to commodities and will struggle in an environment where prices continue to fall. However, it has enjoyed some relief of late due to the exit of Level 4 lockdown and a partial return to work is going to be good for the economy and its currency.
Kiwi bounced strongly on yesterday’s confirmation that lockdown level 4 will end next week, allowing hundreds of thousands of people to go back to work.
“The better news for NZ is arguably how low R0 is and the total absence of positive COVID-19 results in random tests. Strong price action since the bounce off the recent ~0.5925 low puts the Kiwi in upward trend channel; a break of 0.61 is now on the cards,” analysts at ANZ argued.