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The New Zealand Dollar (NZD) came up for air off Monday’s open reaching 0.5630 against the US Dollar (USD). A break higher past 0.5670 is key to solidify momentum to the upside. NZ CPI 3rd quarter came in at a poor 2.2% based on predictions of 1.5% taking the y/y figure from 7.3% to 7.2%- a disastrous release compared to forecasts of 6.6%. The kiwi appreciated 40 odd points and could push higher throughout the day into overnight NY. As sure as the sun will rise the US will enter a recession over the coming months, the timing of this is hotly debated but with inflation persistently high this is causing pain. The forecast for 2023 is looking increasingly gloomy with economists picking growth to contract in the first two quarters of the year, a downgrade from “mild” growth. In the medium term the kiwi may struggle to develop buyer interest with the attractiveness and “safe haven” of the greenback, however with fresh expectations of the RBNZ raising rates higher than predicted this could change.

Current Level: 0.5653
Resistance: 0.5800
Support: 0.5500
Last Weeks Range: 0.5509-0.5680

Tuesday 18/10
1:30AM, USD, Empire State Manufacturing Index
Forecast: -4.3
Previous: -1.5
3:30AM, USD, BOC Business Outlook Survey
10:45AM, NZD, CPI q/q
Forecast: 1.50%
Previous: 1.70%
1:30PM, AUD, Monetary Policy Meeting Minutes
3:00PM, CNY, GDP q/y
Forecast: 3.40%
Previous: 0.40%
3:00PM, CNY, Retail Sales y/y
Forecast: 3.50%
Previous: 5.40%

Wednesday 19/10
7PM, GBP, CPI y/y
Forecast: 10.00%
Previous: 9.90% Read more

US Inflation is still on the rise, further tightening is unavoidable
US CPI seals the deal for another 75-point hike at the Fed’s next policy meeting
The US Dollar soured after the CPI read this morning sending the USD/JPY, AUD/USD, USD/CAD, and NZD/USD to multiyear extremes
NZ September Manufacturing PMI 52.0 vs 54.8
China has no set timeframe for the exit of their zero covid strategy
Germany receives first direct gas delivery from France to ease the energy crunch
US Jobless claims 228k vs 225k
The British Pound (GBP) was the strongest currency this week while the Australian Dollar (AUD) the weakest.

The English Pound (GBP) climbed through the 1.7000 (0.5880) level overnight to reach 1.8100 (0.5525) a fresh high against the Australian Dollar (AUD). Recent economic data out in the UK hasn’t exactly been GBP supportive of late but the GBP has performed well despite this over the past 3 weeks outperforming the kiwi. Overnight markets focused on parts of the UK budget being reversed and tax cuts deferred. This includes more than 20B worth of unfunded tax cuts including corporate tax. Earlier UK GDP fell by -0.3% in the month of August after 0.1% growth in July confirming an underlying trend lower over the last 3 months suggesting a recession could be close. UK inflation prints next week, expected to stay up around the 9.9% y/y mark. With the cross moving off 0.6300 levels this time 3 weeks back clearly this shows how good these levels are to sell GBP.

Exchange Rates:
The current interbank midrate is: AUDGBP 0.5565 GBPAUD 1.7969
The interbank range this week has been: AUDGBP 0.5520- 0.5757 GBPAUD 1.7369- 1.8114

The Australian Dollar (AUD) slumped to 0.6170 in the late NY session Friday against the US Dollar (USD) before reversing losses back to 0.6300 levels around mid-morning. US CPI slowed for the 3rd month running, releasing at 8.2% for September representing the lowest in 7 months compared to August’s 8.2%. Equity markets dropped over 2% on the release before rallying back to close the day up 2-3% across the major indices. Core CPI rose 6.6% from 6.3%, other than lower vehicle and apparel prices there was little else suggesting inflation is being tamed. The rally back from 0.6170 left everyone wondering what on earth just happened. Perhaps purely technical, we do have a support line drawn on our chart representing Feb 2020 lows. By the USD Dollar on the spike.

Exchange Rate:
The current interbank midrate is: AUDUSD 0.6303
The interbank range this week has been: AUDUSD 0.6168- 0.6378

The New Zealand Dollar (NZD), British Pound (GBP) hovered around 0.5065 (1.9750) over most of the week before the Pound took control early today. The Pound rallied to 2.0270 (0.4935) , sinking through key support at 0.5000 (2.000) for the first time since February this year. Markets pushed aside poor economic data earlier in the week instead focusing on parts of the UK budget being reversed and tax cuts deferred. This includes more than 20B worth of unfunded tax cuts including corporate tax. Earlier UK GDP fell by -0.3% in the month of August after 0.1% growth in July confirming a slowing trend over the last 3 months with threats of a recession looming. Selling GBP under 0.5000 represents particularly good selling levels.

Exchange Rate:
The current interbank midrate is: NZDGBP 0.4984 GBPNZD 2.0064
The interbank range this week has been: NZDGBP 0.4934- 0.5114 GBPNZD 1.9554- 2.0266

The New Zealand Dollar (NZD) extended declines early week against the US Dollar (USD) to 0.5530 before recovering to 0.5630 Thursday on a broad rally of risk assets. The rebound had all the hallmarks of a “short squeeze” – sellers exiting positions on the view the cross would travel lower. US CPI slowed for the 3rd month running, releasing at 8.2% for September representing the lowest in 7 months compared to August’s 8.2%. Equity markets dropped over 2% on the day before rallying back to close the day up 2-3% across the major indices. Core CPI rose 6.6% from 6.3%, other than vehicle and apparel prices there was little else implying inflation was being beaten. Buyers of USD should consider as we look to be at the top of the long-term bear channel.

Exchange Rates:
The current interbank midrate is: NZDUSD 0.5644
The interbank range this week has been: NZDUSD 0.5512- 0.5657

Diverging central banks have seen the New Zealand Dollar (NZD) push higher to 0.8980 (1.1140) in early day trading, recouping the last 4 weeks of losses against the Australian Dollar (AUD). The kiwi seeing fresh support from the RBNZ’s ongoing tightening cycle compared with the RBA’s plan to hike interest rates just once more. A slump in iron ore prices hasn’t helped the Aussie of late, the commodity falling to 96.50 per tonne, the lowest in nearly 11 months. Key standouts on the calendar next week are Australian Jobs data and NZ Inflation q/q. Retesting the 0.9000 zone is a possibility prior to the weekly close.

Exchange Rates:
The current interbank midrate is: NZDAUD 0.8951 AUDNZD 1.1171
The interbank range this week has been: NZDAUD 0.8807- 0.9000 AUDNZD 1.1111- 1.1354

The Euro (EUR) extended its domination over the Australian Dollar (AUD) at Monday’s open pushing the cross to 0.6490 (1.5415) into Tuesday as risk sentiment stumbled. The Euro however still generally speaking is under pressure with a combination of weaker Eurozone data and a dovish ECB. German industrial orders and Eurozone Retail Sales were also below expectations. Clearly the AUD remains a currency under fire despite the recent RBA hawkish policy stance and their plan to peg back rate rises. At Least while the war on Ukraine continues, we may see more of the same moves. This morning the cross pushed aside support at 0.6535 (1.5300) to reach 0.6500 (1.5400) signalling we could see further moves towards 0.6175 (1.6200) support.

Current Level: 0.6475 (1.5444)
Resistance: 0.6580 (1.6200)
Support: 0.6170 (1.5200)
Last Weeks Range: 0.6486-0.6648 (1.5049-1.5416)

The British Pound (GBP), Australian Dollar (AUD) cross settled around 0.5750 (1.7400) through the latter half of the week closing around this level. Risk sentiment post Friday’s Non-Farm Payroll release sent equities lower Monday, the Aussie already on the back foot falling to 0.5695 (1.7560) in early Tuesday. To be fair the GBP is doing reasonably well with news of late not being overly Pound supportive. Manufacturing was poor, the weakest since 2020 and the Bank of England will extend its gilt buying to 10B per day this week. The recent hawkish rhetoric by chancellor Kwarteng’s brought forward mini budget fanned speculation back to markets of a larger hike at the next BoE meet of November 3rd. A push past 0.5620 (1.7800) areas could signal a broader decline for the Aussie.

Current Level: 0.5674 (1.7624)
Resistance: 0.6040 (1.7880)
Support: 0.5595 (1.6550)
Last Weeks Range: 0.5648-0.5800 (1.7240-1.7704)