Monday August 7th
All Day AUD Bank Holiday
Tuesday August 8th
All Day CAD Bank Holiday
1:30pm AUD NAB Business Confidence
Wednesday August 9th
12:15am USD FOMC Member Harker Speaks
1:30pm CNY CPI y/y
Forecast -0.40%
Previous 0.00%
1:30pm CNY PPI y/y
Forecast -4.00%
Previous -5.40%
3:00pm NZD Inflation Expectations q/q
Previous 2.79% Read more
The New Zealand Dollar (NZD) slumped to a 5-week low to 0.6060 against the US Dollar (USD) this week. Friday the kiwi has started a recovery of sorts trading back to 0.6077 as I write but with global headwinds it may struggle to gain much momentum to the north. The NZ job market eased in the second quarter with job participation hitting an all-time high of 72.4% with more than 3M people now employed in the workforce. The unemployment rate rose slightly from 3.4% in the first quarter to 3.6 in the second, the question remains- will this be enough to force the hand of the RBNZ to hold interest rates at their next meeting on August 16th- we suspect not. Tonight’s Non-Farm Payroll (NFP) number is predicted to come in light reflecting an easing to the job’s market. Long term support in the cross is around the 0.6040 to 0.6000 range, recent sentiment suggests this area won’t hold.
The current interbank midrate is: NZDUSD 0.6080
The interbank range this week has been: NZDUSD 0.6061- 0.6226
The Australian Dollar (AUD) fell to a 9-week low against the US Dollar (USD) Thursday extending recent losses to 0.6510. The US 10-year treasury bond yield was up 11 points to 4.19% and nears the October 2022 high. This in turn has seen a selloff in equity markets in August with the capacity to deepen. Not good for risk currencies in the near to medium term. Earlier the Reserve Bank of Australia (RBA) left interest rates on hold Tuesday at 4.10% the central bank suggesting they weren’t done yet dependent on incoming data, the AUD backtracking post the release. Non-Farm Payroll tonight with expectation of a mixed result and a slowdown of jobs data.
The current interbank midrate is: AUDUSD 0.6557
The interbank range this week has been: AUDUSD 0.6514- 0.6739
Our predictions were correct with the British Pound (GBP) pushing higher from Tuesday’s 0.5240 (1.9080) to reach 0.5140 (1.9460) in early Friday trading. The lowest level since April 2020. The BoE signalled they are close to reaching a top in this tightening cycle later this year but highlighting further persistent pressures remain with taming inflation, consumer spending and strong wages. Earlier the Bank of Australia surprised markets by holding their cash rate at 4.10% against expectation of a hike, maintaining their forward guidance of further tightening required. For now, the Aussie looks down for the count, the worst performing main board currency.
The current interbank midrate is: AUDGBP 0.5157 GBPAUD 1.9391
The interbank range this week has been: AUDGBP 0.5136- 0.5242 GBPAUD 1.9072- 1.9469
The New Zealand Dollar (NZD) extended midweek losses against the British Pound (GBP) reaching fresh lows around 0.4775 (2.0950) marking a 28-month level in the cross. The Bank of England (BoE) hiked their interest rate 25 points overnight as widely predicted voting 6-3 in favour. The central bank saying they will need to hike again later this year with inflation projections this year still exceedingly high. Earlier in the week NZ job’s data released with the participation rate hitting an all-time high and the unemployment rate clicking higher to 3.6%, up from 3.4% in quarter one. The kiwi looks poorly with further declines on the horizon expected.
The current interbank midrate is: NZDGBP 0.4782 GBPNZD 2.0911
The interbank range this week has been: NZDGBP 0.4771- 0.4844 GBPNZD 2.0643- 2.0959
The New Zealand Dollar (NZD) has continued to move higher throughout the week reaching 0.9325 (1.0725) against the Australian Dollar (AUD) but it hasn’t been all one-way traffic. Although the cross remains within big picture ranges, movement over the week has certainly not been stagnant. The RBA surprised us by leaving their cash rate unchanged at 4.1% in a hawkish release amid expectation they will raise again down the track. NZ Job’s numbers reached an all-time high with 72.4% of eligible people in the workforce. However, the unemployment rate did jump to 3.6% from 3.45 in the June quarter. This may not be enough for the RBNZ to hold rates at their August 16 meeting, but we should get a better signal when NZ inflation expectations are released on Wednesday. We really do need a big-ticket risk event to shift the NZD/AUD cross out of its long-term range.
The current interbank midrate is: NZDAUD 0.9271 AUDNZD 1.0783
The interbank range this week has been: NZDAUD 0.9231- 0.9318 AUDNZD 1.0732- 1.0832
FX Update
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.
The ECB raised rates last week to 4.25% which was fully locked in, rallying the Euro (EUR) through to 1.6570 (0.6035) areas against the Australian Dollar (AUD). Lagarde said the bank was undecided as to whether they will need to hike further or hold at their next meeting in September. We think that with sticky inflation and strong wage growth could support one further hike towards the end of the year. Monday’s price action saw the cross back towards 1.6360 (0.6110) heading into today’s sessions, a retest of the bottom of the recent range at 1.6250 (0.6155) is our bet this week. All eyes will be on the RBA rate decision today, the central bank widely expected to hike from 4.10% to 4.35%.
Current Level: 0.6110 (1.6366)
Resistance: 0.6155 (1.6570)
Support: 0.6035 (1.6245)
Last Weeks Range: 0.6032-0.6150 (1.6260-1.6577)
A double whammy of central bank excitement this week is where our attention fixed on both the RBA and Bank of England (BoE) expected to hike interest rates a quarter percent. The Pound (GBP) gave back losses Monday retreating from 1.9320 (0.5175) to 1.9075 (0.5240) in the lead up to today’s RBA decision, pushing back towards the top of the recent trading range. The AUD/GBP sits at the top of a trend channel, we expect the cross to retest 1.9300 (0.5180) levels over the week.
Current Level: 0.5237 (1.9094)
Resistance: 0.5280 (1.9175)
Support: 0.5215 (1.8940)
Last weeks Range: 0.5175-0.5282 (1.8931-1.9322)
The Australian Dollar retraced Friday losses against the US Dollar (USD) from the 0.6620 low reaching 0.6740 early Tuesday as “risk” improved. Repricing of Fed expectations late in the week saw the Aussie drop from 0.6820 on strong data releases as the Fed considers hikes, adding downside pressures for the AUD. US Consumer sentiment rose to its highest level in 2 years as the job’s market remains stable. RBA today should see a rise of 25 points to the cash rate to 4.35%- marking the highest rate since November 2011. Later in the week key Non-Farm Payroll releases should give us plenty of volatility across the board. The cross may struggle to push past 0.6750 resistance this week.
Current Level: 0.6722
Resistance: 0.6890
Support: 0.6645
Last Weeks Range: 0.6620-0.6819