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Tuesday 08/11
3pm, USD, Inflation Expectations q/q
Previous: 3.07%
10:30pm, NZD, RBA Gov Lowe Speaks

Wednesday 09/11
All Day, AUD, Congressional Elections

Thursday 10/11
8pm, FOMC Member Waller Speaks Read more

The New Zealand Dollar (NZD) extended last week’s moves on the Euro (EUR) to 0.5990 (1.6690) midweek as data supported the kiwi and weakened the Euro across the board. Headline Eurozone inflation grew again in October to 10.7% year on year revised up from 9.9% in September with energy prices the main issue along with rising food costs. Negative growth is predicted for fourth quarter 2022 and first quarter 2023 set to drop the Eurozone into recession, however how deep this recession goes lies with developments in the energy sector- a worry with winter on the horizon. NZ Employment numbers came in better than expected with a 1.3% increase in the number of working people, this remaining at a record low. Labour shortages are contributing to high inflation. We think the kiwi may push higher into the close.

The current interbank midrate is: NZDEUR 0.5917 EURNZD 1.6900
The interbank range this week has been: NZDEUR 0.5823- 0.5992 EURNZD 1.6688- 1.7173

The New Zealand Dollar (NZD) has gathered pace as the week went on against the British Pound (GBP) reaching 0.5180 (1.9300) this morning up from the weekly open of 0.5000 (1.9990). The New Zealand labour market remained tight in the third quarter with the unemployment remaining at 3.3% the same as the second quarter near record lows. The labour force participation rate increased to 71.7% the highest recorded stats began back in 1986. The Bank of England members voted 9/love raising their benchmark interest rate from 2.25% to 3.0% early this morning, the largest rate rise since 1989. The Central bank admitted that the large hike will likely drive the economy into a recession which could last well over 1 year. The Bank of England governor saying, “it’s a tough road ahead”. Customers buying Pounds should consider with chances we could see “risk off” moves take shape over coming weeks.

The current interbank midrate is: NZDGBP 0.5170 GBPNZD 1.9342
The interbank range this week has been: NZDGBP 0.4999- 0.5192 GBPNZD 1.9259- 2.0004

New Zealand Dollar (NZD) upside bias continued into Wednesday against the US Dollar (USD) travelling to 0.5940 post the Fed statement but was beaten back down soon after to 0.5820 over the couple of hours that followed. Jerome Powell signalled a higher top for interest rates and isn’t worried about over tightening, his comments completely reversed the initial dovish stance leading to a sell off reversal in stocks, commodities and risk products including the kiwi. The Fed raised rates 75 points as predicted to 4.00% with Powell saying he would consider slowing the pace of rises at the December meeting but the pace of the increases shouldn’t be misread as a signal the Fed was backing away from hiking any time soon. US Non-Farm Payroll prints in the morning with expectations the number of newly employed people will jump higher as it has done over the past 6 months. Certainly, Powell is hoping this number is soft and a slowdown of sorts gets underway ultimately giving him some leeway with raising future interest rates.

The current interbank midrate is: NZDUSD 0.5767
The interbank range this week has been: NZDUSD 0.5739- 0.5940

The divergence between the RBA and the RBNZ is becoming evident as the New Zealand Dollar (NZD) continues to rally off the back of varying tones. It’s been 5 weeks straight the kiwi has outperformed. The RBA raised their cash rate 0.25% to 2.85% as planned with the central bank saying future rate increases will be determined by incoming intel. The RBA’s outlook for global growth has been revised lower to 3.0% over 2023 and 1.5% for 2023 and 2024. Inflation is now predicted to peak at around 8.0% at year end and slowly drift lower over 2023. NZ Employment numbers came in better than expected with a 1.3% increase in the number of people working- near the record low with labour shortages contributing to high inflation. NZ Unemployment was slightly higher at 3.3% from 3.2%. We expect momentum to continue for the kiwi.

The current interbank midrate is: NZDAUD 0.9170 AUDNZD 1.0896
The interbank range this week has been: NZDAUD 0.9046- 0.9214 AUDNZD 1.0852- 1.1054

The Australian Dollar (AUD) underperformed over the week dipping to 0.6290 into Friday against the US Dollar (USD) as risk off flows dominated moves. The RBA raised their cash rate 0.25% to 2.85% Tuesday as widely planned with the central bank saying future rate increases will be determined by incoming data. The RBA’s outlook for global growth has deteriorated with just 1.5% in 2023 and 2024. Expectations of inflation for 2023 is around 4.75% from the current 7.3% if the RBA can manage monetary policy/rate hikes. The Federal Reserve raised rates three quarters of a percent as predicted to 4.00% Thursday with Powell saying he would consider slowing the pace of rises at the December meeting but the pace of the increases shouldn’t send a signal the Fed was done raising rates. The release sent the pair initially higher to 0.6490 before Powell’s speech reversed equity markets and the AUD back to 0.6340 within the hour. Looking ahead we have Non-Farm Payroll (NFP) tomorrow morning along with unemployment, we expect a similar rhetoric.

The current interbank midrate is: AUDUSD 0.6290
The interbank range this week has been: AUDUSD 0.6271- 0.6490

The Australian Dollar (AUD), British Pound (GBP) remained within its recent range over the week, the Aussie outperforming, reversing last week’s losses to 0.5645 (1.7720). Early in the week the RBA raised their cash rate to 2.85% form 2.6% as markets were predicting with the central bank saying future rate increases will be decided by incoming data. The RBA’s outlook for global growth has worsened over the last couple of months with 3.0% this year and just 1.5% 2023 and 2024. Expectations of inflation for 2023 is circa 4.75% from the current 7.3% if the RBA can manage interest rates. Overnight the Bank of England (BoE) members voted 9/0 raising their interest rate from 2.25% to 3.0% early this morning, the largest rate rise for over 30 years. The Central bank admitted that the large hike will likely shift the economy into a recession very soon which could last well over 1 year. The Bank of England governor saying, “it’s a tough road ahead”. Despite the AUD improving we still believe it’s a good time to sell GBP.

The current interbank midrate is: AUDGBP 0.5635 GBPAUD 1.7746
The interbank range this week has been: AUDGBP 0.5516- 0.5672 GBPAUD 1.7628- 1.8126

The EUR has traded most of this week in a heavy tone versus the Australian Dollar (AUD), the cross travelling to 1.5340 (0.6520) before recovering into Friday to 1.5480 (0.6420) The RBA Tuesday raised their cash rate as predicted from 2.6% to 2.85% with the RBA saying more rate hikes can be expected but incoming data dependant. The outlook has also deteriorated to just 1.5% growth in 2023 and 2024 with inflation to come off 7.3% to somewhere around 4.75% in 2023 as long as the RBA can manage rate hikes accordingly. Looking ahead we have a light calendar week of data with just EU Economic forecasts Friday. A retest of the recent 0.6380 (1.5680) low looks likely.

The current interbank midrate is: AUDEUR 0.6451 EURAUD 1.5501
The interbank range this week has been: AUDEUR 0.6427- 0.6518 EURAUD 1.5341- 1.5558

Key Points:

• NZ House Prices are set to keep falling according to a Reserve Bank report, to more sustainable levels – the fallout from negative consumer sentiment and higher borrowing costs
• US Federal Reserve hiked their interest rate to 4.0%, the highest it’s been since December 2007
• The Bank of England hiked their interest rate to 3.0% from 2.25% in a dovish review with Bailey saying the shock to the economy from the Ukraine war was bigger than the carnage seen in the 1970’s 
• Hong Kong Central Bank raises base cash rate by 75 points to 4.25% 
• Russia has agreed to re-join the Ukraine grain deal in a deal brokered by the UN and Turkey that allows the shipment of millions of tons of grain to pass via the Black Sea
• China October Manufacturing PMI 48.4 vs prior 49.3 with covid cited as the culprit
• The Reserve Bank of Australia raises interest rates 25 points to 2.85%
• The US Dollar (USD) is the strongest currency this week while the British Pound (GBP) has been the worst performer.

Tuesday 01/11
4:30PM, AUD, Cash Rate
Forecast: 2.85%
Previous: 2.60%
4:30PM, AUD, RBA Rate Statement
All Day, EUR, French Bank Holiday
All Day, EUR, Italian Bank Holiday
9:30PM, AUD, RBA Gov Lowe Speaks

Wednesday 02/11
3AM, USD, ISM Manufacturing PMI
Forecast: 50
Previous: 50.9
3AM, USD, JOLTS Job Openings
Forecast: 9.75M
Previous: 10.05M
10:45AM, NZD, Employment Change q/q
Forecast: 0.50%
Previous: 0.00%
10:45AM, NZD, Unemployment Rate
Forecast: 3.20%
Previous: 3.30% Read more