NZD reaction as New Zealand set to reopen its borders

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IGTV’s Daniela Sabin Hathorn looks at a few trades around the New Zealand dollar (NZD/USD, GBP/NZD, and AUD/NZD) as the government will put an end to some of the world’s toughest COVID-19 travel restrictions on 31 July.

 

Forex New Zealand dollar New Zealand Pound sterling NZD/USD GBP/NZD

Daniela Sabin Hathorn | Presenter and Analyst, London | Publication date: Wednesday 11 May 2022 23:52

New Zealand to open borders

New Zealand will fully reopen its borders on July 31st, as announce by Prime Minister, Jacinda Arden, on Wednesday.

This brings the date forward by two months as the government’s timeline to lift all remaining COVID-19 restrictions takes place earlier than expected in hopes it will help revive economic activity.

Whilst the country's efforts to reduce the spread of the pandemic has been praised worldwide, it has put a big toll on some of its industries, including tourism, agriculture, and hospitality.

That being said, travellers will still need to go through pre-departure testing before arriving in New Zealand, which many believe will still be a barrier to entry for tourism.

The reaction in the New Zealand dollar has been slightly limited so far but with so many market themes in play at present it may take a while for the re-opening trade to settle in.

NZD/USD

Focusing first on NZD/USD, the pair is up three-quarters of a percent since the close on Tuesday, the first day momentum has opened on the bullish side since last Wednesday.

But considering the move last week was fully brought on by weakness in the USD side of the trade, today is the first daily candlestick to be holding in the green since the 20th of April. Its hard to tell how much of this move higher has been brought on by optimism in the NZD, especially considering the Dollar Index (DXY) is trending lower this morning, but its likely that some optimism has been priced into the kiwi, along with some dip-buying after a brutal month for the pair.

A close above yesterday’s high at 0,6348 would be needed to consider this price reversal more sustainable.

GBP/NZD

For GBP/NZD the story has been a little different.

The pair hasn’t moved in a clear direction as we’ve seen with NZD/USD, with both the NZD and GBP side of the trade showing weakness in recent weeks.

The kiwi is strongly linked to commodity prices which has meant a rather volatile environment for the currency for the last two months, but the lack of a decisive move in the pound, like we’ve seen with USD, has meant GBP/NZD has trended upward since the April 5th lows, but the move hasn’t been homogeneous.

The daily chart shows the pair has seen some strong daily rallies in three occasions since then, but the initial bullish strength lacked momentum in its continuation, leaving it exposed to correction in both the moves higher so far.

Monday’s bullish run failed to reach the ascending trendline resistance the other two daily rallies faced, which means there was already a lack of conviction from buyers to continue propping up its price.