Recession fears in the USA continue to drive poor sentiment across the board with the overall theme of investors buying the safe haven greenback. The New Zealand Dollar (NZD) made solid improvements last week but failed to consolidate around tops of 0.6560 drifting lower over the week to 0.6440 this morning. The Fed’s GDP tracker has recently fuelled more worry around the chances of a recession with the World Bank downgrading the global growth forecasts. The OECD says the increased inflation expectations and the war in Ukraine has made for a chilling growth outlook. We await the US inflation read for May with predictions of a rise of 0.7%. Should the print come in lower markets may draw conclusions that headline inflation may have peaked. It’s hard to see further upside in the kiwi over the short to medium term all things considered- buying the USD on spikes could be the way to go.
NZD/USD pair this week:
The current interbank midrate is: NZDUSD 0.6438
The interbank range this week has been: NZDUSD 0.6422- 0.6535
The Australian Dollar (AUD) has outperformed the New Zealand Dollar (NZD) this week extending its long-term bull run from previous months pushing through key support at 0.9000 (1.1100) reaching 0.8960 (1.1160) today the lowest level in the cross since October 2017. The Reserve Bank of Australia hiked their interest rate 50 points in a surprise move to 0.85% with most predictions of a 25-point move. A hawkish tone from Governor Lowe should keep the pressure on the kiwi for a while especially given the RBA is expected to hike again another 50 points at their July policy meeting. Next week’s Aussie employment figures and NZ growth (GDP) q/q read are the calendar highlights with growth forecast to come in at 3.0% for the first quarter 2022. Trend is your friend they say- buyers of AUD should consider around 0.9000 levels.
NZD/AUD pair this week:
The current interbank midrate is: NZDAUD 0.8965 AUDNZD 1.1143
The interbank range this week has been: NZDAUD 0.8958- 0.9487 AUDNZD 1.1054- 1.1162
All Day, NZD, Bank Holiday
All Day, EUR, French Bank Holiday
All Day, EUR, German Bank Holiday
8am, GBP, Govt. Confidence Vote
8am, AUD, Cash Rate
8am, AUD, RBA Statement
2am, CAD, Ivey PMI
2am, USD, Treasury Sec Yellen Speaks Read more
• US Holiday Monday (Memorial Day) made for thin markets
• US President Biden meets with Prime Minister Ardern today
• Soaring inflation forecasts and the war on Ukraine is threatening to throw world economies into a disastrous recession
• US Consumer confidence 106.4 vs 103.98 predicted
• The Bank of Canada interest rate decision is tomorrow morning with a 50-point hike already priced in. Markets are anticipating another 50 points at the July 13 meeting but pulled back on expectations the cash rate will be as high as 2.8% at year-end due to ongoing rapid declines in house prices
• Markets are now predicting a 115-point rise to the ECB interest rate by the end of the year with a 50-point hike at their July meeting with headline inflation passing 8.0% recently
• German unemployment -4k vs -16k expected
• Russia has cut off gas supplies to the Netherlands
• France prelim CPI jumps higher to 5.2% vs 5.0% y/y expected
• Crude Oil climbs to a 12-week high of $118.00 after the EU agrees to ban Russian oil imports
• The Canadian Dollar (CAD) is the strongest currency this week with the Japanese Yen (JPY) the weakest.
• Japan May consumer confidence 34.1 vs 33.0 Read more
The Australian Dollar (AUD) retreated off the open against the Euro to hit resistance at 0.6725 (1.4870) before falling back to 0.6695 (1.4940) into Tuesday. Early “risk on” was evident but replaced by uncertainty with the Eurozone inflation printing at 8.1% vs 7.8%- the highest in over a decade with energy and food prices equating for two thirds of the number. This raises questions on how the ECB will delicately raise rates while keeping inflation in check and not causing a disastrous situation of the economy stagnating. The ECB is forecast to raise by 25% at the July meeting. The AUD may be encouraged by today’s GDP first quarter read, predicted to be 0.6% . Analysts have voiced saying this figure may be a little light. A breakthrough 0.6725 (1.4870) could signal an extended run higher from the AUD.
Current Level: 0.6698 (1.4929)
Resistance: 0.6760 (1.5180)
Support: 0.6590 (1.4800)
Last Weeks Range: 0.6581-0.6718 (1.4885-1.5194)
The British Pound (GBP), Australian Dollar (AUD) broke free from its 3-week trading range Monday passing 0.5680 (1.7610) on its way to reach 0.5710 (1.7510) early Tuesday. Higher stock prices this week and US Fed repricing its rate hike expectations has given support to the Aussie. This comes off the back of a poor economic outlook in China and the small miss in Australian Retail Sales. The key standout on the economic docket this week is today’s Australian GDP with predictions of 0.6% growth for the first quarter 2022. Anything lower than this could test the AUD.
Current Level: 0.5700 (1.7543)
Resistance: 0.5810 (1.7800)
Support: 0.5620 (1.7220)
Last Weeks Range: 0.5617-0.5685 (1.7588-1.7801)
The Australian Dollar (AUD) extended last week’s gains against the US Dollar (USD) clocking 0.7202 before dropping back. US Fed hike predictions have been revised lower following a poor read in the first quarter GDP release which came in at -1.5% vs -1.3%. Analysts now predict the Fed will hike rates this year to 2.5%-2.75% through to December lower than earlier initial numbers of 2.75% -3.0%. The first quarter GDP is the first in 5 quarters to contract suggesting alarming predictions of upcoming trade deficit numbers. Non-Farm Payroll Friday is expected to show improving unemployment (3.5%) and moderate jobs results for May. We see stiff resistance at 0.7220 suggesting a pullback could be in order.
Current Level: 0.7191
Last Weeks Range: 0.7035-0.7164
New Zealand’s ANZ Business outlook survey painted a dim view of the NZ economy consistent with a sluggish economy. The NZD is a little weaker this week – nothing too serious, strangely only posting small losses against the Euro (EUR) to 0.6070 (1.6470) earlier today. The ECB will start their tightening cycle in July when they hike their interest rate 25 points marking the first hike in over a decade. Even with inflation numbers creeping up over the Eurozone region the central bank will be cautious with hiking too fast causing a stagflation effect. Overnight Eurozone inflation came in at 8.1% y/y, higher than the 7.8% expected causing more pain for the ECB. The economy is already struggling in the wake of the Ukraine war with increased prices across the board rising causing more pressure for consumers and businesses going forward. The latest oil embargo will add to EUR pressures adding further speculation of a recession. The 3-week bull run in the kiwi may continue for a bit.
Current Level: 0.6084 (1.6436)
Resistance: 0.6135 (1.6800)
Support: 0.5950 (1.6300)
Last Weeks Range: 0.5990-0.6108 (1.6370-1.6692)
Risk currencies were buoyant Monday continuing the run from late week, the New Zealand Dollar (NZD) pushed through to 0.5190 (1.9260) against the British Pound (GBP) before dropping back to 0.5160 (1.9375) early Tuesday. The Pound has been bid overnight on the back of US Dollar repricing of US Federal rate hike expectations. The UK government announced a financial aid package to counteract the massive rises in the cost of living recently. Boris Johnson introduced a “tax on oil profits” which is expected to raise around 5B over the year to help cash payments to millions. 8M of the countries lowest income earners will receive GBP 650.00 as a one-off payment. Resistance at 0.5195 (1.9250) the 50% fib retracement area should hold for a while with predictions of a retest at 0.5100 (1.9600) over the coming days.
Current Level: 0.5174 (1.9327)
Resistance: 0.5250 (1.9640)
Support: 0.5090 (1.9050)
Last Weeks Range: 0.5114-0.5194 (1.9250-1.9553)
The Australian Dollar (AUD) has reversed last week’s losses against the New Zealand Dollar (NZD) into Tuesday, the pair trading to 0.9070 (1.1030) from the open at 0.9140 (1.0940). The Aussie better bid off the back off sinking NZ House prices, talk of recessions and a spike in Ore prices (135.50). Aussie GDP q/q is expected to print later today at 0.6% – well down from the last Q of 2021 at 3.4%. However, some analysts predict growth could print higher than forecast thus giving the AUD a possible boost.
Current Level: 0.9077 (1.1009)
Resistance: 0.9190 (1.1100)
Support: 0.9010 (1.0880)
Last Weeks Range: 0.9071-0.9182 (1.0890-1.1023)