NZD/USD Conversion:

US Holiday conditions Monday affected flow, the New Zealand Dollar (NZD) bumping to 0.6560 areas before retreating towards 0.6480. We have seen a wave of equity buying of late propping up the kiwi, but recent reversals have seen the kiwi on the backfoot over the past few hours. The hawkish tone we have seen of late in Fed rate forecasts have propped up risk but with recent first quarter GDP down -1.5% vs -1.3% worse than predicted there has seen a rethink from the Fed. Earlier numbers of where the interest rate might sit at year end were around 2.75%- 3.0% but this has been pared back to 2.5% – 2.75%. It’s certainly shaping up to be fascinating viewing with the Fed stuck between a rock and a hard place on monetary policy with forecasts of a recession looming. The NZ House Price Index (HPI) fell another 0.8% in May following a 0.9% in April making it the biggest 3 month fall since 2010 when markets were still recovering from the GFC.

Current Level: 0.6527
Resistance: 0.6570
Support: 0.6430
Last Weeks Range: 0.6414-0.6547

AUD to USD Conversion:

The Australian Dollar (AUD) has held up well this week against the US Dollar (USD) as risk sentiment globally improved. Prices early Friday is milling around the 0.7100 area with further upside bias predicted over the day. Prelim US GDP came in slightly worse than predictions at -1.5% vs -1.3% for the first quarter as stronger consumer spending failed to offset weak business and private sector spending. There were no surprises from the Federal Reserve overnight when they read the May meeting minutes with participants agreeing that a 50-point hike to the interest rate was appropriate at their next June and July meetings. We have seen a slight pullback in precious metals weighing on the Aussie but was nullified by pending US home sales m/m which printed -3.9% after -1.9% was excepted for April. US holiday Monday should give us a slow start to the week.

The current interbank midrate is: AUDUSD 0.7101
The interbank range this week has been: AUDUSD 0.7034- 0.7123

NZD to GBP

We have seen a lot of volatility in the British Pound (GBP), New Zealand Dollar (NZD) this week with price moving lower early week then advancing to 0.5195 (1.9250) midweek as the RBNZ hiked interest rates from 1.5% to 2.0%. There is undoubtedly more to come for the RBNZ with predictions we may see the interest rate climb to 3.3% by the end of this year. Thursday’s flow was back with the GBP with hawkish speak coming from the Bank of England sending moves back towards 0.5130 (1.9500). The UK PMI read for May confirmed the economy ground to a halt siting rising inflation which are weighing on demand conditions. This is not helping to ease fears of a looming recession in the UK as early as next year. The BoE has already priced in 5 more hikes for 2022 but now could pull back to 4 or less. Overall trend in the NZD/GBP is still bearish with expectation of a retest of 0.5080 (1.9680) the previous low in the coming days.

The current interbank midrate is: NZDGBP 0.5135 GBPNZD 1.9474
The interbank range this week has been: NZDGBP 0.5114- 0.5195 GBPNZD 1.9247- 1.9553

NZD to USD Conversion

The New Zealand Dollar (NZD) is up around 1c against the US Dollar (USD) this week climbing to 0.6515 Wednesday post the RBNZ statement before drifting back in the last 48 hours to 0.6480. The RBNZ raised the cash rate by 50 points to 2.0% from 1.5% as expected, sending the kiwi higher. The RBNZ has now hiked 175 points from last October with more rises on the table at upcoming central bank meeting later in the year. Predictions are for the cash rate to peak at 3.25% by Christmas. Personally we hold the view that being too aggressive could derail the economy as efforts are made to bring the inflationary target back to 1-3%. With equities struggling and wider concerns over global uncertainty with the war on Ukraine we could see further NZD selling into rallies in the near to medium term. For now, buyers should enjoy the kiwi spikes while on offer.

The current interbank midrate is: NZDUSD 0.6483
The interbank range this week has been: NZDUSD 0.6414- 0.6513

NZD to AUD Conversion

The Australian Dollar (AUD) has been rather stagnant over the week across the board, under pressure by falling commodity prices and a poor performing RMB. The New Zealand Dollar (NZD) has outperformed and has looked reasonably solid in the wake of our midweek RBNZ central bank rate hike announcement. The central bank hiked rates from 1.5% to 2.0% and is predicted to hike again at the next meeting with expectations of the interest rate tapping out at around 3.25% by the end of 2022. Poor performing metals have also weighed on the Aussie- the cross reaching 0.9180 (1.0890) early Friday before travelling back to 0.9130 (1.0950). Key data out next week comes in the form of Australian GDP q/q – not predicted to be a bumper read. We could see an uptick in the kiwi over the next few days.

The current interbank midrate is: NZDAUD 0.9126 AUDNZD 1.0952
The interbank range this week has been: NZDAUD 0.9071- 0.9183 AUDNZD 1.0889- 1.1023

AUD to GBP Conversion:

The Australian Dollar (AUD), English Pound (GBP) has remained within recent ranges this week with a slight bias in the GBP to 0.5630 (1.7765) Friday. The Aussie hasn’t been particularly supported with the RMB breaking lower on economic worry. UK PMI print for May confirmed the economy looks sluggish with concerns over rising inflation and consumer demand. Fears of a recession remain high with predictions the economy could be in the red as early as 2023. The Bank of England expects to hike rates 5 times over the remainder of 2022 but could bring this into 4 if things don’t improve. A move lower to 0.5600 (1.7860) could signal further downside in the pair.

The current interbank midrate is: AUDGBP 0.5627 GBPAUD 1.7771
The interbank range this week has been: AUDGBP 0.5617- 0.5686 GBPAUD 1.7586- 1.7801

FX Update: RBNZ In Focus

Key Points:

• Soaring inflation forecasts are threatening to throw world economies into recession
• Japanese Manufacturing for May 53.2 vs prior 53.5
• China is showing further support for Russia and wants to erode dominance of the US Dollar as sanctions ramp up
• NZ first Q Retail Sales -0.5% vs expectations of 0.3%- last Q 2021 was 8.6%
• Fed’s Bostic is calling for a 50 point rise in September is inflation is still high
• According to ECB’s Villeroy, a rate hike in the near term is probably a done deal
• Russia is studying a peace plan to the Russia/Ukraine war proposed by Italy
• Banks slash China 2022 growth forecasts from 4.2% to 3.0% as economy contracts
• The Euro (EUR) is the strongest currency this week with the United States Dollar (USD) the weakest.
• Iron ore bounces off 122.00 lows back to 132.00 assisting the AUD higher Read more

AUD/EUR Conversion:

After sitting around 0.6665 (1.5000)  for most of last week the Euro (EUR) has been better bid this week coming from 1.4870 (0.6725) during early Monday sessions to 1.5060 (0.6640) this morning with German Producer prices printing at their highest level since figures began. This shows resilience in the economy despite higher inflation, recession concerns and the war in Ukraine. Technically we predict further strength to develop in the EUR as the bear trend continues through to meet the 100-day moving average at 0.6580 (1.5200). Lagarde speaks tomorrow.

Current Level: 0.6631 (1.5080)
Resistance: 0.6755 (1.5330)
Support: 0.6525 (1.4800)
Last Weeks Range: 0.6615-0.6717 (1.4887-1.5117)

AUD/GBP Conversion:

The Australian Dollar (AUD), British Pound (GBP) has traded sideways over the past fortnight, pivoting around its current price of 0.5650 (1.7700) for much of the time. UK Inflation rose from 7.0% in March to 9% in April y/y, its highest level since 1982 prompted by huge price rises in electricity and fuel costs but the biggest rise came from housing costs and utility expenses up 19% putting the squeeze on real consumer spending. If we see inflation go above 10% for a sustained period in the coming months, the forecast cash rate peak of 1.25% in 2022 will look more like 3%. It’s a thin docket this week with just UK flash manufacturing tonight. We expect movement this week to stay within recent levels with small gains in the Pound possibly to 0.5620 (1.7800).

Current Level: 0.5634 (1.7749)
Resistance: 0.5805 (1.8120)
Support: 0.5520 (1.7230)
Last Weeks Range: 0.5612-0.5682 (1.7599-1.7819)

AUD/USD Conversion:

Scott Morrison has been defeated in the local Australian elections held over the weekend conceding to the Labour party and new Prime Minister Anthony Albanese. The centre left Labour party won 72 of the 76 seats needed for a parliamentary majority. This ends 9 years of leadership by the centre right Liberal party. The Australian Dollar (AUD) as predicted never really reacted to the headline. The Aussie was however bid off Monday’s open in response to US Dollar (USD) weakness and better bid equity markets. On the menu this week we focus on Fed chair Powell speaking tomorrow and FOMC minutes Thursday. We expect further upside to develop and a retest of the “fib” 50% retracement at 0.7200.

Current Level: 0.7076
Resistance: 0.7270
Support: 0.7000
Last Weeks Range: 0.6870-0.7072