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The New Zealand Dollar (NZD) clocked a two-week high overnight against the Australian Dollar (AUD) of 0.9275 (1.0780) before falling back to 0.9240 (1.0820) as I write. RBA Decision later today is our key data with markets looking for direction in the cross. The RBA should hike 25 points, this is not a given but with recent data highlighting stubborn inflation, wage pressures and inflation we expect them to raise. This should give the NZD/AUD downward pressure post release. NZ Wage data tomorrow is also key for the RBNZ- anything lower than a 3.5% read of unemployment may raise questions for further tightening policy.

Current Level: 0.9243 (1.0811)
Resistance: 0.9321 (1.0909)
Support: 0.9166 (1.0728)
Last Weeks Range: 0.9154-0.9267 (1.0790-1.0924)

The New Zealand Dollar (NZD) was re-routed off 0.6120 Friday against the US Dollar (USD) pushing back towards 0.6160 at the weekly close. Monday it extended moves higher reaching 0.6225 as market mood improved. NZ Employment data tomorrow should see a small uptick in the unemployed with 3.6% predicted, the RBNZ will be keeping close watch on the figure as this could hinge towards a further cash rate rise in November. Certainly, if this happens we could see a spike in the NZD. Late in the week we have pivotal US Non-Farm Payroll data risk, hopefully we should get future clues to policy guidance. Downside bias is expected this week.

Current Level: 0.6214
Resistance: 0.6389
Support: 0.6150
Last Weeks Range: 0.6119-0.6271

Market Overview

Key Points:

• Australian Manufacturing in July 49.6 vs 48.2 expected, with pressures over the past few months easing.
• NZ Building Permits for June +3.5% m/m prior -2.2% which is positive, however the number is still down 20% from the June 22 figure.
• Chinese media are taking pot shots at Australia again warning of tight ties with the US after the two countries expand military operations together.
• US earnings season continues this week with Apple, Amazon and Uber up this week.
• German Retail Sales -0.8% vs 0.2% expected in June highlighting poor consumer spending.
• July Chinese manufacturing data index (49.3) remains in contraction- the 4th straight month.
• The Japanese Yen (JPY) is the strongest performer over the month of July with the US Dollar (USD) the worst performer.

Major Announcements last week:
German and French manufacturing print below expectations
Australian CPI y/y 6.0% ending June quarter
ECB hike 25% points to 4.25%
Canadian GDP m/m 0.3%
US advanced GDP second quarter 2.4% vs 1.8% expected.

Monday July 31
1:30pm CNY Manufacturing PMI
Forecast 48.9
Previous 49

Tuesday August 1
4:30pm AUD Cash Rate
Forecast 4.35%
Previous 4.10%
4:30pm AUD RBA Rate Statement

Wednesday August 2
2:00am USD ISM Manufacturing PMI
Forecast 46.9
Previous 46
2:00am USD JOLTS Job Openings
Forecast 9.61M
Previous 9.82M
10:45am NZD Employment Change q/q
Forecast 0.60%
Previous 0.80%
2:00am NZD Unemployment Rate
Forecast 3.50%
Previous 3.40% Read more

It’s been a quiet week in the New Zealand Dollar (NZD), British Pound (GBP) pair with action restricted to recent range bound moves. The kiwi did however take on water overnight rebounding off 0.4800 (2.0840) to 0.4845 (2.0650) as equity markets traded lower impacting risk currencies. Odds are 50/50 for the Bank of England (BoE) to hike a full 50 points at their meeting next week. The downtrend is still intact from the high of 0.4900 (2.0450), the GBP should recover losses into the weekly close.

The current interbank midrate is: NZDGBP 0.4834 GBPNZD 2.0686
The interbank range this week has been: NZDGBP 0.4788- 0.4853 GBPNZD 2.0604- 2.0884

Trading Thursday took the Australian Dollar (AUD), US Dollar (USD) from 0.6820 to 0.6700 levels into Friday, the Aussie giving back gains as market risk mood deteriorated. News that Rio Tinto had cut its dividend payment as earnings fell to its lowest level in 3 years weighed on the AUD. Earlier in the week Australian inflation dipped to 5.4% in the 12 months to June compared to 5.5% in the 12 months to May 2023, Quarterly the rate has dipped to 6.0% ending June from 7.0%, lower than the 6.20% consensus. Meanwhile, the Fed lifted rates to 5.5% as widely predicted, resuming their tightening policy yesterday which takes them to a 22 year high. Powell saying it was too early to make a call on whether they would need to raise further. We expect moves to extend to the downside with price to potentially retest support at 0.6600.

The current interbank midrate is: AUDUSD 0.6710
The interbank range this week has been: AUDUSD 0.6699- 0.6821

Fibonacci support held mid-week in the Australian Dollar (AUD), New Zealand Dollar (NZD) pair at 0.9160 (1.0920) as we predicted with price moving to the upside to 0.9230 (1.0834). Aussie inflation data printed Wednesday weakening the AUD as CPI in Australia dipped to 5.4% in the 12 months to June compared to 5.5% in the 12 months to May, quarterly the rate has moderated to 6.0% ending June from 7.0%, lower than 6.20% consensus. Looking ahead we have the RBA cash rate announcement Tuesday which should deliver a rise from 4.10% to 4.35%. Topside moves look overbought with price starting to reverse, we expect the 0.9200 (1.0870) to retest prior to the weekly close.

The current interbank midrate is: NZDAUD 0.9216 AUDNZD 1.0843
The interbank range this week has been: NZDAUD 0.9152- 0.9232 AUDNZD 1.0826- 1.0926

The Australian Dollar (AUD) retraced midweek gains against the British Pound (GBP) trading from 0.5280 (1.8930) back to 0.5215 (1.9180) post the Australian CPI release. Inflation dipped to 5.4% in the 12 months to June compared to 5.5% in the 12 months to May 2023, Quarterly the rate is down to 6.0% ending June from 7.0%, lower than the 6.20% consensus. This marks the lowest figure since the third quarter of 2022 which has been primarily driven by a slowdown in food prices. Next week it’s all about central bank cash rate releases with both the Bank of England and Bank of Australia releasing. The RBA is expected to hike 25 points to 4.35% while the BoE may go large and raise 50 points instead of earlier forecasts for just a 25-point shift. Trendline support should hold at the 0.5235 (1.9100) level with price to retrace back towards 0.5280 (1.8940) zone.

The current interbank midrate is: AUDGBP 0.5244 GBPAUD 1.9069
The interbank range this week has been: AUDGBP 0.5214- 0.5282 GBPAUD 1.8934- 1.9180

The New Zealand Dollar (NZD) slipped below key 0.6200 yesterday against the US Dollar (USD) clocking 0.6180 into Friday trading as it looks bearish. Markets turned risk averse buying the greenback in post “Fed” selling, the Fed raising rates 25 points to 5.50% the 11th raise since March 2022 and a 22 year high. It’s possible this could be the last hike in this cycle with inflation coming down recently although the Fed remains open to further tightening if inflation throws a curveball. Also of note, the Fed aren’t predicting a recession in 2023, Powell adamant the US economy will come down soft. Technically the pair is trading at the bottom of an uptrend channel suggesting we may see the kiwi push back to 0.6200 in the near term.

The current interbank midrate is: NZDUSD 0.6185
The interbank range this week has been: NZDUSD 0.6155- 0.6273

FX Update

Key Points:

With Russia pulling out of the Black Sea grain agreement this is not expected to have a massive impact on US food prices and inflation.
We see a 25% chance the US will fall into recession over the next 12 months.
Australian Inflation cooled more than expected for quarter 2, 2023 easing pressures on the Bank of Australia to raise rates at the next policy meeting 1st August.
The ECB raised their cash rate to 3.75% from 3.5% this morning as expected, the central bank going ahead with further tightening to combat high inflation despite fears of a recession.
US advanced GDP 2.4% vs 1.8% expected.
The Japanese Yen (JPY) is the strongest performer over the week with the Euro (EUR) the worst performer.