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Australian employment data came in light yesterday initially not making a dent on the Australian Dollar (AUD), US Dollar (USD) cross. However, with risk sentiment poor and punters buying up the greenback we have seen the cross post 0.6690 a May 2020 low. The Unemployment rate unexpectedly clicked higher to 3.5% from 3.4% in August and the workforce added 33,500 jobs to the economy as predicted. The RBA might see these numbers as a result of tighter monetary policy doing its job. Of note the participation rate rose to 66.6% just 0.2% below the record high set in June and the pre-covid level. The tight labour market however suggests the RBA will keep rising interest rates over the coming months but at a slower pace we suspect. Looking ahead we have the FOMC statement and rate release next week with the Fed widely predicted to hike to 3.25% from 2.5%.

The current interbank midrate is: AUDUSD 0.6700
The interbank range this week has been: AUDUSD 0.6683- 0.6915

Risk averse conditions in financial markets supported the Euro (EUR) this week extending recent gains against the New Zealand Dollar (NZD) to 1.6750 (0.5970) where it sits in early Friday trading. New Zealand GDP data for the second quarter published much higher than the 1.0% markets were predicting at 1.7%, this shouldn’t persuade the RBNZ to change up their policy over the coming months as inflation – the root of the economic problems still needs managing. The RBNZ should still keep the view of another 1.0% of hikes this year to 4.0%. The Euro looks overbought and could test 0.5880 (1.7000) support, we think this area should hold as the kiwi is expected to recover losses.

The current interbank midrate is: NZDEUR 05962 EURNZD 1.6772
The interbank range this week has been: NZDEUR 0.5962- 0.6083 EURNZD 1.6439- 1.6771

The English Pound (GBP) reached 0.5180 (1.9300) Thursday against the New Zealand Dollar (NZD) , a 5-week high. The kiwi has struggled all week off the back of UK inflation data coming in under forecast of 10.1% at 9.9% y/y helping to support the GBP along with a risk off tone. UK Inflation unexpectedly edged lower off the 1982 high, the first time in nearly a year it has eased. NZ Growth for the second quarter came in at a healthy 1.7% much higher than the predicted 1.0% with the economy avoiding a recession. The kiwi is holding gains into Friday kicking back to 0.5220 (1.9150) but may struggle towards the close with risk markets starting to turn down.

The current interbank midrate is: NZDGBP 0.5200 GBPNZD 1.9230
The interbank range this week has been: NZDGBP 0.5180- 0.5277 GBPNZD 1.8950- 1.9300

The New Zealand Dollar (NZD) slumped to 0.8888 (1.1250) in early week trading against the Australian Dollar (AUD) recovering from the NZ quarterly GDP release to 1.1185 (0.8940). GDP printed at 1.7% for the second quarter after 1.0% was predicted, the economy bouncing back from first quarter numbers at -0.2% as NZ came out of covid lockdowns and tourism improved. Households spent more on hospitality and accommodation however overall consumer spending looks to be slowing. Aussie employment data came in benign with the Unemployment Rate ticking higher to 3.5% from 3.4% and the participation rate maintaining near record highs around 67%. The Aussie has had the upper hand in Friday trading with the cross around 0.8908 (1.1222). Key 0.8820 (1.1340) suggests a 7 year low, we wouldn’t bet against this materialising.

The current interbank midrate is: NZDAUD 0.8898 AUDNZD 1.1233
The interbank range this week has been: NZDAUD 0.8884- 0.8942 AUDNZD 1.1182- 1.1256

The British Pound (GBP) has had its best week against the Australian Dollar (AUD) since mid-August clocking 1.7220 (0.5810) midweek boosted by better-than-expected UK Inflation data printing and assisted by a general risk off tone. UK Inflation came in at 9.9% off 10.1% y/y the highest it’s been since 1982 followed by Australian jobs data, the Unemployment Rate unexpectedly clicking higher to 3.5% from 3.4% in August as the workforce added 33,500 jobs to the economy. The bullish trend in the cross should continue with a retest of 0.5880 (1.7000) likely in the coming days but global risks remain

The current interbank midrate is: AUDGBP 0.5845 GBPAUD 1.7108
The interbank range this week has been: AUDGBP 0.5809- 0.5919 GBPAUD 1.6893- 1.7213

The Euro (EUR) extended gains over the week on the Australian Dollar (AUD) to 1.4930 (0.6700) a mid-July low, the 3rd week straight the Euro has outperformed. Markets were risk averse over the first half of the week before Aussie employment data printed. Data was generally in line with expectations with the Unemployment Rate rising to 3.5% and the workforce adding 33,500 jobs. No data published in the Eurozone meant big picture themes were also in play. Fib support at 0.6665 (1.5000) should hold into the close, we expect a reversal towards 0.6800 (1.4700) next week.

The current interbank midrate is: AUDEUR 0.6697 EURAUD 1.4932
The interbank range this week has been: AUDEUR 0.6692- 0.6816 EURAUD 1.4670- 1.4941

Key Points:

Fed member Dalio sees the Federal Reserve hiking interest rates to 4.5% possibly as high as 6.0% …currently the rate is 2.5% with a rate decision on the calendar next week.
Today is one of 4 yearly “Quadruple Witching” days where 4 different sets of Futures and Options expire on the same day. These days can often signal extremely volatile moves in financial products including currencies when traders close or roll positions. Today marks an extra massive day as over 3 times the normal volume at roughly 3.3 Trillion worth of products fall due
NZ Manufacturing for August rises to 54.9, solidly in expansion- the highest level since July 2 01
US Core Retail Sales for August -0.3% off 0.0% expected
Australian New Home Sales declined 1.6% over August after a 13.1% drop in July
The US Dollar (USD) has been the strongest currency over this week while the New Zealand Dollar (NZD) is the weakest on the main board
The NZD has broken through key support and psychological 0.6000 we will see over the following few days if this break is sustained and ingrained

Another week another new low in the New Zealand Dollar (NZD) dropping to 0.5955 as I write against the US Dollar (USD). This is an early May 2020 level set as the kiwi was recovering off 0.5530 style lows in line with the start of the covid pandemic in early 2020. This week’s NZ second quarter GDP surprised markets printing much higher than the 1.0% predicted at 1.7% rebounding hard off first quarter’s -0.2% from improved consumer spending and the opening of tourism. Reports suggests a cautionary approach heading into the late months of 2022 and early 2023 with “real” incomes eroding which could undermine growth forecasts. Next week’s key standout is the Fed policy and rate announcement with expectations the Fed will hike 75 points to 3.25%. Long range support in the pair is 0.5680 – there is not a lot fundamentally which could return the kiwi higher.

The current interbank midrate is: NZDUSD 0.5967
The interbank range this week has been: NZDUSD 0.5965- 0.6160

The Euro (EUR) climbed off the weekly open reaching 1.4820 (0.6750) against the Australian Dollar (AUD) after strong stock gains were made but soon lost ground falling back to 1.4690 (0.6810) early today. European equity markets rose after natural gas prices fell around 8% after Ukraine recaptured a large chunk of territory. Lagarde says she will provide liquidity to banks not energy companies in the wake of soaring prices, here we go again printing cash. This week’s Aussie employment figures is our focus with the country predicted to hold its record low unemployment at 3.4% and the number of people looking for work decreases. Topside moves made recently by the Euro we consider “short term” with the currency still under enormous pressures.

Current Level: 0.6786 (1.4736)
Resistance: 0.6865 (1.5100)
Support: 0.6620 (1.4570)
Last Weeks Range: 0.6720-0.6865 (1.4565-1.4881)

UK GDP for July printed at 0.2% Monday pushing up the British Pound (GBP) momentarily to 1.7030 (0.5870) against the Australian Dollar (AUD) from the opening price of 1.6925 (0.5910). This was a small miss on the 0.5% expected but nevertheless positive data. Services grew by 0.4% but “Information and Communication” was the main driver. The Truss government will be aiming to expand energy production and lift the fracking ban, meanwhile the Bank of England has pushed back their policy meeting to September 22 in light of the Queen’s passing. Aussie employment data prints Thursday and could give the AUD a nudge if a change to the workforce increases.

Current Level: 0.5885 (1.6992)
Resistance: 0.5925 (1.7140)
Support: 0.5835 (1.6879)
Last Weeks Range: 0.5837-0.5928 (1.6869-1.7132)