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The New Zealand Dollar (NZD), Australian Dollar (AUD) cross continued to bang around in recent ranges this week with a tinge of upside bias with the kiwi. The low being 0.9295 (1.0760) and the high 0.9350 (1.0695) suggests the pair is positioning for directional cues. Aussie CPI y/y came off 7.2% to 6.8% disappointing analysts, adding to the poor mood was a weaker Retail Sales release. Next week’s RBNZ cash rate hike to 5.0%, possibly 5.25% from 4.75% hopefully will give us clues as to where the central bank sees their interest rate cap based on inflation forecasting. We still see upside possible in the kiwi especially if the RBNZ gives a message that they still have work to do to bring down inflation to their 2.0% target.

The current interbank midrate is: NZDAUD 0.9329 AUDNZD 1.0710
The interbank range this week has been: NZDAUD 0.9292- 0.9351 AUDNZD 1.0693- 1.0761

Key Points:

• NZ inflation expectations rise from 5.2% to 5.4% the highest read in 9 months.
• Ex US president Donald Trump has been indicted by a grand jury citing 4 people had knowledge of his porn star payment. He will be the first president, current or former to face criminal charges.
• A climate report has issued a warning that over 40,000 NZ flood prone coastal and non-coastal homes are at risk of losing insurance over the next 2-3 decades. 
• Cracks are starting to appear in the stability of European banks with the ECB “tapping” into the Fed’s credit swap lines to the tune of 487 million
• German prelim CPI y/y 7.4% vs 7.3% expected.
• The Australian Council of Trade Unions has called for a 7% rise in the minimum wage at the June meeting.
• NZ March consumer confidence falls to 77.7 from 79.8 in February.
• The Euro (EUR) has been the strongest currency in March with the US Dollar (USD) underperforming, the worst performer.

Monday March 27
12:50pm JPY SPPI y/y
Actual: 1.80%
Forecast: 1.80%
Previous: 1.60%
9:00pm EUR German ifo Business Climate
Actual: 93.3
Forecast: 91
Previous: 91.1
EUR M3 Money Supply y/y
Actual: 2.90%
Forecast: 3.20%
Previous: 3.50%
EUR Private Loans y/y
Actual: 3.20%
Forecast: 3.60%
Previous: 3.60%
10:30pm EUR German Buba President Nagel Speaks
11:00pm GBP CBI Realised Sales
Actual: 1
Forecast: -2
Previous: 2 Read more

Wednesday March 22
1:30am CAD CPI m/m
Forecast 0.50%
Previous 0.50%
CAD Median CPI y/y
Forecast 4.80%
Previous 5.00%
CAD Trimmed CPI y/y
Forecast 4.90%
Previous 5.10%
8:00pm GBP CPI y/y
Forecast 9.90%
Previous 10.10%

Thursday March 23
7:00am USD FOMC Economic Projections
USD FOMC Statement
USD Federal Funds Rate
Forecast 5.00%
Previous 4.75%
7:30am USD FOMC Press Conference Read more

After weeks of big moves in the British Pound (GBP), New Zealand Dollar (NZD) this week has seen relatively speaking mostly sideways play. Perhaps the GBP has held up slightly better from an upbeat UK budget. The Pound dipped to a low of 1.9415 before settling early around 1.9560 (0.5115) areas. UK’s Hunt has said the UK will not enter a recession this year as the outlook slowly improves and “inflation halves” – he predicts inflation to fall from 10.7% to 2.9% by the end of this year. The New Zealand Economy contracted more than expected in the fourth quarter of 2022 with figures reflecting a growth downturn of -0.6% compared to the forecast figure of -0.2%, this marks part 1 of entering a formal recession with two quarters in a row required. With the RBNZ interest rate at 4.75% we may only see a further 25-point hike to 5.0% at the 4th April meeting, this is based on earlier forecasting of a 5.5% peak in the cash rate mid this year. A retest of 0.5075 (1.9700) is our pick in the medium term.

The current interbank midrate is: NZDGBP 0.5109 GBPNZD 1.9573
The interbank range this week has been: NZDGBP 0.5087- 0.5150 GBPNZD 1.9415- 1.9658

The Australian Dollar (AUD) entered Friday around the 0.6650 region after dropping below 0.6600 Thursday as risk mood deteriorated, the fallout from two US bank closures impacting. Australian employment data beat expectations in February the jobless rate underpinning the modest push higher. The Unemployment Rate dropped to 3.6% from 3.5% marking the lowest rate since the 1970’s. Speculation on how much the Fed will raise rates at next week’s meeting is hotting up with punters divided on a 25- or 50-point hike. US data of late has been positive although inflation is still stubbornly high after easing from 6.4% to 6.0% during the week- good- but not good enough. The forecast to the end of January was for a 25-point hike, now this is 50 points – some may say not justified if we consider the recent two US bank closures. The hellbent approach to destroying high inflation may have the Fed seeing too much “red”. The downward spiral from 0.7100 numbers in early February looks to continue its bear run. Support seen at 0.6520, if the Fed raises 50 points next week this may come into view.

The current interbank midrate is: AUDUSD 0.6655
The interbank range this week has been: AUDUSD 0.6588- 0.6715

The New Zealand Dollar (NZD) came off a fresh 11 week high of 0.9375 (1.0670) midweek against the Australian Dollar (AUD) snapping lower on worse than expected 4th quarter GDP. Expectations of a -0.2% number was monstered by a surprise -0.6% figure sending the kiwi retreating across the board. The cross was soon at 0.9260 (1.0800) assisted by an improved Australian Jobs number print. Unemployment dropped from 3.6% to 3.5% highlighting the RBA still has a way to go to suppress high inflation and strong economic growth. Chances of an interest rate rise from 3.6% now highly likely at the 4th April policy meeting. The long range forecast of the cross heading into 2024 looks now to be poised to possibly fall into the high 80’s sooner than expected.

The current interbank midrate is: NZDAUD 0.9301 AUDNZD 1.0741
The interbank range this week has been: NZDAUD 0.9260- 0.9369 AUDNZD 1.0673- 1.0798

The New Zealand Economy contracted more than expected in the fourth quarter of 2022. Figures shown reflecting a downturn in growth of -0.6% compared to the forecast figure of -0.2%. The big question to come out of this release is whether the RBNZ will continue to hike rates to 5.5% or halt. We predict another 25 points to 5.00% is all that’s needed in this policy tightening cycle. Let’s be honest here- New Zealanders are already hurting. The RBNZ always said they would continue to hike into a recession, and we are halfway there. Of note the original calculation put GDP at -1.2% but with the new seasonally adjusted calculation method it wasn’t as worse. Of the 16 industries 9 experienced declines in activity with manufacturing down 1.9%, household spending has been flat, but expectations are for this to worsen over the coming months. The kiwi dived around 80 points on the release but recovered somewhat into last night’s US market open and hovers around a steady 0.6170 this morning.

The current interbank midrate is: NZDUSD 0.6191
The interbank range this week has been: NZDUSD 0.6138- 0.6263

Key Points this week:
Happy St. Patrick’s Day
US Bank SVB- Silicon Valley Bank was forced to close last weekend by regulators over concerns of solvency. SVB is the 16th largest US bank with 210B in assets. Following this was the closure of another US bank closure Signature Bank also based on liquidity issues, this bank’s financial position however was not as bad as SVB.
US Inflation cooled in February to 6.0% down from 6.4% y/y but remains stubbornly high. The challenge for the Federal Reserve is how to best slow the economy.
NZ National house prices were lower in the month of February down 13.9% y/y to 762,000
New Zealand GDP ending Dec 2022 came in light at -0.6% compared to -0.2% predicted.
US Retail Sales fell 0.1% in February to 0.4% from 0.3% offering another reason for the Fed to pause hikes.
ECB members raised the interest rate by 50 points last night to 3.50% pushing borrowing costs to the highest levels since 2008.
Predictions are for 2023 China GDP forecast to rise from 5.5% to 6.0%.
The Japanese Yen (JPY) has been the best performing currency this week while the Euro (EUR) has been the worst performer

MonMar 13 11:20am USD Fed Announcement
TueMar 14 8:00pm GBP Claimant Count Change
12.5K -12.9K
GBP Average Earnings Index 3m/y
5.70% 5.90%

WedMar 15 1:30am USD CPI m/m
0.40% 0.50%
USD CPI y/y
6.00% 6.40%
USD Core CPI m/m
0.40% 0.40% Read more