RBNZ To Take Policy Decision As Virus Resurfaces

NZD/USD crept higher in Tuesday's Asia-Pac session, amid a broader recovery in risk appetite, before taking a hit in the European morning, as New Zealand reported its first community transmission of Covid-19 in more than 100 days. The pair continued to slide through the rest of the day, as DXY recouped losses as U.S. Tsy yields pushed higher. NZD/USD breached support from Aug 3 low of $0.6575 and extended its losing streak to three consecutive days.

• The detection of new coronavirus infections of unknown origin in Auckland prompted NZ authorities to take swift action and put the city into lockdown, while implementing milder restrictions in the rest of the country, which has been put on alert level 2.
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• The incident interrupted the ongoing election campaign, which inspired National & ACT leaders to call for a delay to the dissolution of parliament.
• FinMin Robertson confirmed to Stuff that the government considers targeted economic support for Auckland, possibly wage subsidy extension (current scheme expires on Sep 1)
• Renewed uncertainty will not be a comfortable backdrop for the RBNZ, which delivers its MonPol decision today. The central bank is expected to provide some details on its policy options, while analysts are divided as to whether policymakers will expand the LSAP programme.
• Then, focus turns to Thursday's FPI & Friday's BusinessNZ M'fing PMI.
• NZD/USD last at $0.6575, marginally shy of neutral levels. Bears need a dip through the 50-DMA at $0.6546 before targeting $0.6532-28, which limited losses on Jul 15-20. Conversely, a move through Tuesday's high of $0.6627 would open up Aug 7 high of $0.6691.