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The New Zealand Dollar (NZD) made solid attempts this week to recover months of losses against the Euro (EUR) trading up to 0.5840 (1.7130) Monday and 0.5860 (1.7070) post Wednesday’s RBNZ announcement but has failed to push on with the long term bear trend back in play- the cross at 0.5770 (1.7320) in early Friday as equity markets turn red on the day. The RBNZ raised their interest rate to 3.5% from 3.0% the 5th straight occasion the central bank has hiked in this tightening cycle. Most market makers still predict the RBNZ to keep rising above 4.0%, possibly reaching 4.5% before the government contemplates inflation is beaten. Orr said, domestic spending remained strong and employment levels are high despite house prices continuing to decline. The Euro may continue to struggle in the near term as EU officials call for a joint borrowing plan to combat the eurozone energy crisis.

The current interbank midrate is: NZDEUR 0.5781 EURNZD 1.7298
The interbank range this week has been: NZDEUR 0.5715- 0.5858 EURNZD 1.7069- 1.7495

The New Zealand Dollar (NZD) extended declines over most of the week breaking briefly below key 0.5000 (2.000) support against the British Pound. The first time since February this year. The GBP wasn’t able to sustain the level however, the kiwi back at 0.5070 (1.9720) in early Friday trading after equity markets improved. Fitch ratings agency has lowered its forecast of the UK economic outlook from stable to negative. Fitch saying the recent “fiscal” package announced as part of the government’s growth plan leads to significant fiscal deficits over the coming months. They expected the govt growth deficit would be nearly 8% of GDP compared to nearly 9% in 2023 unless they took offsetting measures. Meanwhile new PM Truss and finance Minister backtracked on their tax cut to top income earners, this caused UK gilt yields to fall sharply, this sent the NZD/GBP to 0.5000 (2.000). The RBNZ raised their key interest rate to 3.5% from 3.0% the fifth straight time the central bank has raised in this tightening cycle, the kiwi popping up to 0.5100 (1.9600) levels where it’s been able to hold around here into Friday.

The current interbank midrate is: NZDGBP 0.5069 GBPNZD 1.9727
The interbank range this week has been: NZDGBP 0.4987- 0.5115 GBPNZD 1.9547- 2.0052

The New Zealand Dollar Reached 0.5813 midweek against the US Dollar (USD) before falling back at the Reserve Bank of New Zealand cash rate Release. The RBNZ raised their key interest rate to 3.5% Wednesday from 3.0% the fifth straight time the central bank has hiked in this tightening cycle. Inflationary pressures continue to undermine the economy. Most market makers still predict the RBNZ to keep rising above 4.0%, possibly topping out at 4.5% before the govt believes inflation has been defeated. These hikes are certainly in line with other central banks policy despite growing recession prospects, all except the RBA who this week announced a slowing pace. Orr said, domestic spending remained resilient and employment levels are high despite house prices continuing to decline. US Non-Farm Payroll prints tonight and is predicted to be a bumper release giving the kiwi a boost into the close.

The current interbank midrate is: NZDUSD 0.5658
The interbank range this week has been: NZDUSD 0.5596- 0.5812

The path of both the RBA and RBNZ monetary policy widened this week when both central banks hiked rates. The RBA less than economists were predicting- only 25 points instead of the 50 points expected. This signals their intention they are nearly “done” with their hiking cycle, markets now pricing in just one more rise of 25 points to 2.85%. This is in stark contrast to the RBNZ who have a way to go before they reach the mid 4% zone hiking 50 points to 3.50% Wednesday. RBNZ’s Orr says it remains appropriate to continue to tighten for the foreseeable future in order to bring down inflation. The NZDAUD pushed up over the week to 0.8900 (1.1240) into Friday before the AUD recovered losses to 0.8820 (1.1340)

The current interbank midrate is: NZDAUD 0.8822 AUDNZD 1.1324
The interbank range this week has been: NZDAUD 0.8740- 0.8898 AUDNZD 1.1238- 1.1441

US Equity markets closed the 3rd quarter with one of the worst Septembers in years
The Federal Reserve has been criticised over the months for raising interest rates too slow- now they are being accused of raising too fast
Deputy PM Robertson on the wires saying he is not concerned for the NZ economic outlook
Grocery prices have risen in the last year by 13% around the globe- this is the biggest rise since March 1979
IMF say the chances of a global recession are rising
German economic forecasts suggest -0.4% GDP next year putting them in a recession
The US Dollar (USD) was the strongest currency over the month of September while the New Zealand Dollar (NZD) was the weakest.

The Australian Dollar (AUD) bounced back off the weekly close of 0.6523 (1.5330) the long term low to 0.6635 (1.5070) into Tuesday on improving market sentiment and equity market rises, the DOW up over 2.5% on the day. The Euro has come under pressure as Russia captured four Ukraine regions with no end to the war insight. This week’s key standout is today’s RBA cash rate announcement with a rise to 2.85% expected, most likely the last 50-point rise in this tightening cycle before 25-point rises come into effect as Lowe cautiously approaches warnings of choking economic growth.

Current Level: 0.6614 (1.5119)
Resistance: 0.6685 (1.5340)
Support: 0.6520 (1.4960)
Last Weeks Range: 0.6523-0.6796 (1.4714-1.5329)

The English Pound (GBP) staged a massive recovery last week coming from 0.6300 (1.5890) to close around 0.5760 (1.7370) as the carnage continued. Confusion around govt politics with the government set to tax high income earners was abolished. Truss saying, she was “absolutely committed”. She was undone by finance minister Kwarteng when he announced they were not proceeding saying- “we get it and we listened”. The GBP rose sharply after the news was confirmed. Today’s RBA rate announcement is our focus with another rise to 2.85% predicted. Usually this would bring buyers back into the AUD, but we are not so sure today.

Current Level: 0.5740 (1.7421)
Resistance: 0.6060 (1.7780)
Support: 0.5625 (1.6500)
Last Weeks Range: 0.5727-0.6306 (1.5856-1.7460)

Equity rallies off Monday’s open have returned the Australian Dollar (AUD) to a healthier 0.6500 against the US Dollar (USD) from recent historical lows around 0.6380. US Bond yields ticked lower as the greenback was sold off. The US Dollar index retreated to 112.00. The US economy is facing a hard landing as the Federal Reserve remains committed to fighting inflation despite fears they could send the economy into recession. The Fed are predicted to raise rates further to around 4.4% early 2024. The labour market remains tight- it seems the only way the US economy is able to bring down inflation is to delve into recession. The RBA rate release is out today with the central bank expected to raise interest rates to 2.85% from 2.35%- perhaps the last big move before Lowe backs off and slows the tightening cycle to 25-point moves. Downside risks remain in the pair. Buyers of USD should consider.

Current Level: 0.6505
Resistance: 0.6640
Support: 0.6360
Last Weeks Range: 0.6362-0.6529

The New Zealand Dollar (NZD) reached a new low Friday, touching 0.5705 (1.7530) a November 2020 against the Euro (EUR). Markets exciting the kiwi after Russia captured 4 Ukraine regions. Monday’s prices improved as risk conditions turned- equity markets all closing higher on the day with talk of Russia no longer having control of these captured provinces as Ukraine troops advanced. On the calendar this week we have the RBNZ rate announcement and policy statement. With the central bank predicted to raise a further 50 points to 3.5% the fifth straight 50-point hike. Analysts are predicting the bank may need to hike to 4.5% well into 2023 to combat rising inflation.

Current Level: 0.5816 (1.7193)
Resistance: 0.5935 (1.7530)
Support: 0.5705 (1.6850)
Last Weeks Range: 0.5706-0.5969 (1.6751-1.7525)

Last week’s uptrend in the British Pound (GBP) was indeed intense across the board after the Pound collapsed to 0.5535 (1.8070) early in the week before surging back to briefly reach 0.5010 (1.9960) against the New Zealand Dollar (NZD). A perfect storm of political uncertainty, Inflation and higher interest rates threatened the financial system in the UK spooking markets. The tax cuts by new PM Truss sparked concerns about the UK’s fiscal stability crashing the GBP and UK govt Bonds known as “gilts”. The UK then abolished the planned tax cuts to high income earners after a public backlash making a U turn on the commitment sending the GBP to 0.5020 (1.9920). On the calendar this week is the RBNZ cash rate announcement and a hike to 3.5% which could give the kiwi a boost.

Current Level: 0.5047 (1.9813)
Resistance: 0.5335 (1.9950)
Support: 0.5010 (1.8750)
Last Weeks Range: 0.5011-0.5548 (1.8023-1.9954)