NZD/USD steadies near mid-0.56s, erases around 1% on the day
- RBNZ launches new QE of $30 billion to support economy.
- US Dollar Index erases Friday's losses, stays close to 103.
- Market sentiment is likely to continue to drive pair's action on Monday.
The NZD/USD pair erased more than 300 pips last week as worries over a shortage in funding markets boosted the demand for the greenback. At the start of the new week, the pair extended its slide following the Reserve Bank of New Zealand's (RBNZ) announcement before going into a consolidation phase. As of writing, the pair was trading at 0.5647, erasing 1.05% on a daily basis.
During the Asian session on Monday, the RBNZ said that it will start purchasing $30 billion worth of government bonds across the yield curve for the next 12 months.
Commenting on this announcement, “QE will help support the economy and soothe markets that have been dysfunctional," said analysts at ANZ Research. "We believe this package will have an immediate and significant impact on the local bond market.”
Eyes on US politics
On the other hand, the surging number of coronavirus infections and related fatalities globally force investors to continue to seek refuge and make it difficult for the risk-sensitive NZD to show resilience against its rivals. The US Dollar Index, which closed the previous week 3.3% higher, was last up 0.73% on the day at 102.70.
In the absence of significant macroeconomic data releases, the market sentiment is likely to continue to drive the pair's action. In the meantime, investors will be looking to see if the US finally approves a fiscal stimulus package to negate the negative impact of the coronavirus outbreak on the economic activity.
Technical levels to watch for