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Eurozone Manufacturing data was mixed, and German economic sentiment came in above forecast, meanwhile the RBNZ raised rates 50 points in a dovish read. This has set the tone of late- the New Zealand Dollar (NZD) retreating lower to 0.5820 (1.7180), the yearly open was circa 0.5960 (1.6780) highlighting Euro momentum in 2023. The Fibonacci chart pattern suggests we could see a reversal back towards support at 1.7060 (0.5860), the 61.8% fib level based on recent higher lows followed by lower lows.

Current Level: 0.5814 (1.7199)
Resistance: 0.5855 (1.7500)
Support: 0.5715 (1.7080)
Last Weeks Range: 0.5823-0.5890 (1.6980-1.7173)

NZ Retail Sales published soft Monday dragging down the New Zealand Dollar (NZD) from 0.5165 (1.9360) to this morning’s 0.5115 (1.9550) extending last week’s run lower against the British Pound. This move compounds on 4 weeks of poor performance by the kiwi in the face of a range of GBP supportive news. Climbing through 1.9350 (0.5170) the break above here corresponds with a move above the 100-day MA and could signal further upside.

Current Level: 0.5113 (1.9557)
Resistance: 0.5215 (1.9970)
Support: 0.5007 (1.9170)
Last Weeks Range: 0.5122-0.5204 (1.9215-1.9523)

Discouraging NZ Retail Sales sent the New Zealand lower Monday against the Australian Dollar (AUD) reversing earlier moves from last week’s 0.9185 (1.0885) to 0.9150 (1.0930). RBNZ’s Conway said the cash rate was expected to peak at 5.5% mid this year if spending is reigned in and consumption slows. We are yet to see a shift to the long-range bull trend, a fall through 0.9230 (1.0830) would certainly signal a momentum change. Price is forecast to retreat to 0.9025 (1.1080) especially if the iron ore price rally continues.

Current Level: 0.9151 (1.0921)
Resistance: 0.9190 (1.1020)
Support: 0.9075 (1.0880)
Last Weeks Range: 0.9019-0.9173 (1.0901-1.1087)

The New Zealand Dollar (NZD) continues to track lower against the US Dollar (USD) reaching a 13-week low overnight of 0.6128 before bouncing to 0.6170 over the past couple of hours of trading. Pressures remain to the downside for the kiwi, but we are expecting a “recovery” rally of sorts. In line with this is the 100-day MA which could give the kiwi a lift in the short term. A break above 0.6300 would take out most of the downside risks.

Current Level: 0.6167
Resistance: 0.6350
Support: 0.6130
Last Weeks Range: 0.6161-0.6260

Market Overview

Central Bank action and Inflation continues to dominate market moves this year with the Ukraine War raging on in the background hitting currencies hard.

The New Zealand Dollar (NZD) has earned the spot of the second to worst performer in 2023 so far ahead of the Japanese Yen (JPY), whereas the US Dollar (USD) has been the strongest performer.

As predicted the RBNZ raised their interest rate 50 basis points from 4.25% to 4.75% recently but defied expectations of a signal for a lower peak. In line with recent weather events there’s still room to move higher than the 5.5% initial top with policy guidance still required at the current pace. At 5.5% this would make it one of the highest interest rates in the developed world. With cyclone Gabrielle destroying large parts of New Zealand’s North Island the battle with inflation just got tougher for the RBNZ with several billions said to be needed to rebuild infrastructure and homes. Inflation currently stands at 7.2% for the fourth quarter of 2022 way to high. Read more

Sunday Feb 26
Day 4 All G20 Meetings

Monday Feb 27
10:45am NZD Retail Sales q/q
Forecast: 0.20%
Previous: 0.40%
10:00pm GBP MPC Member Broadbent Speaks

Tuesday Feb 28
2:30am USD Core Durable Goods Orders m/m
Forecast: 0.10%
Previous: -0.20%
2:30am USD Durable Goods Orders m/m
Forecast: -3.70%
Previous: 5.60%
4:00am USD Pending Home Sales m/m
Forecast: 0.90%
Previous: 2.50%
5:10pm JPY BOJ Gov-Designate Ueda Speaks Read more

The Australian Dollar (AUD) has extended last week’s losses falling back to 0.6780 this morning as risk mood waivers and equity markets close in the red. Fed minutes confirmed members were unanimously in favour of a 25 point rise on the 1st of Feb allowing them to better evaluate the economies progress as they determine the extent of future tightening. Another 25 point rise at the next meeting late March was also likely. US annual growth slowed in December to 2.7% from the expected 2.9% the 4th quarter straight it has published underestimate. Spending from services was up 2.4% while exports fell 1.6%. Upcoming on the docket we have US new home sales and looking into next week Australian CPI. 0.6650 offers stable support in the pair.

The current interbank midrate is: AUDUSD 0.6813
The interbank range this week has been: AUDUSD 0.6781- 0.6919

The British Pound (GBP) looked strong during early week trading clocking 1.9520 (0.5120) before pulling back to 1.9300 (0.5180) areas this morning. The RBNZ raised the cash rate 50 points as predicted Wednesday to 4.75% helping the kiwi to go on a short rally, Orr saying chances of a longer period of high inflation and ultimately higher interest rates look a possibility based on recent weather events which have devastated NZ. Citigroup are predicting a giant fall to inflation towards the end of this year with figures to slump to close to 2.0% with lower gas prices being the main driver. All things being equal we could see sharp rises in the NZD/GBP as monetary policy diverges. For the moment the GBP has enjoyed 3 weeks of momentum- we suspect this won’t last.
The current interbank midrate is: NZDGBP 0.5184 GBPNZD 1.9290
The interbank range this week has been: NZDGBP 0.5122- 0.5204 GBPNZD 1.9214- 1.9522

As predicted the RBNZ raised their interest rate 50 basis points from 4.25% to 4.75% Wednesday but defied expectations of a signal for a lower peak. In line with recent weather events there’s still room to move higher than the 5.5% initial top with policy guidance still required at the current pace. The New Zealand Dollar (NZD) pushed up to 0.6250 from 0.6200 levels against the US Dollar (USD) but has failed to hold here falling back to lows. The Fed minutes highlighted a tight labour market, risk in the Ukraine War helping to keep inflation elevated, on the whole economic risks are still tilted to the downside. US GDP fell to 2.7% for the fourth quarter 2022 compared to 2.9% predicted for the fourth quarter in a row, the figure has come in light as unemployment claims unexpectedly fell in the month of December. The cross sits at the key support around 0.6200 as I write, we think this should hold into the close.

The current interbank midrate is: NZDUSD 0.6232
The interbank range this week has been: NZDUSD 0.6196- 0.6262

On Wednesday, the RBNZ hiked interest rates 50 points to 4.75% as widely predicted with peak expectations of 5.5% marked slightly lower in late 2023. Recent devastation from cyclone Gabrielle could spoil this however as we head into 2024 with a tight labour market and inflation if it stays stubbornly high for longer periods. Softer than expected Aussie jobs data Wednesday meant the AUD was dealt a double hit falling from 1.1050 (0.9050) area to 1.0930 (0.9150) this morning, wages declining 0.8% for the fourth quarter 2022 highlighting proper income pressures on consumers with contrasting high CPI. A fall below 1.0830 (0.9235) would signal a momentum shift, for now the cross sits around the bottom of the recent bull trend.

The current interbank midrate is: NZDAUD 0.9144 AUDNZD 1.0932
The interbank range this week has been: NZDAUD 0.9017- 0.9154 AUDNZD 1.0924- 1.1089