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NZD Surges With Economy Set to Reopen




NZD has been on the front foot at the start of the week, with NZDUSD advancing back towards the 0.61 mark, having dipped to the low 0.59s at the end of last week. 


The Kiwi is today being supported by the news that it will be one of the first countries to begin easing Covid-19 lockdowns, PM Arden announced overnight. Also supporting NZD is firmer than expected Q1 CPI data; Q/Q 0.8% vs exp. 0.4%, Y/Y 2.5% vs exp. 2.1%. 


As a recap, New Zealand introduced its most stringent lockdown measures in late March; shutting down offices, schools and all non-essential services including bars, restaurants, cafes and playgrounds.


However, PM Arden announced that the country will move out of alert level 4 on April 27, after which it will be in alert level 3 for two weeks.


“On the recommendation of the Director General of Health, who is confident there is currently no widespread undetected community transmission in New Zealand, today we are able to take a balanced approach in transitioning through alert levels and restarting our economy,” Ardern said.


Construction, manufacturing and forestry businesses would be allowed to operate under the new rules, meaning hundreds of thousands of people will resume work, local media reported.


Shops, malls, hardware stores and restaurants will remain shut under alert level 3, but can permit online or phone purchases.





Might NZD become an outperformer?


In the coming weeks, it will be worth watching out for divergence between different countries in terms of how quickly they are able to successfully end lockdowns. 


As we have seen this morning with NZD and GBP, markets are responding to faster or slower lockdown exit timelines; NZD is supported by its comparatively faster lockdown exit timeline, while GBP was pressured by PM Johnson casting doubt whether the UK will exit lockdowns within three weeks. 


However, let's not forget that NZD is a highly risk sensitive currency. If risk appetite does take a turn for the worse in the coming weeks (i.e. global equities come back under sustained pressure), NZD will likely be hit, regardless of the lockdown situation in New Zealand.


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