FX News

The ECB raised their benchmark interest rate to 4.00% from 3.75% with Lagarde saying another hike was expected in July.
New Zealand House Price medium in May is unchanged from April.
China is expected to step in supporting the housing sector further to boost growth.
Recent forecasts are predicting the UK to narrowly avoid drifting into a recession.
The Peoples Bank of China cuts the interest rate from 2.75% to 2.65%.
Analysts are predicting many more rate hikes from the Bank of England to come.
Australian Unemployment dips to 3.6% from 3.7%.
New Zealand Manufacturing contracted in May, the index at 48.9 following 3 months of poor performance and well under the long-term average of 53.0.
The Australian Dollar (AUD) has been the standout performer in the week or May compared to the Japanese Yen (JPY) , the worst performing currency.

The British Pound (GBP) recovered off 2.0340 (0.4915) midweek post the Bank of England (BoE) release clawing back losses against the New Zealand Dollar (NZD) to 2.0550 (0.4865) into Friday. UK GDP rose 0.2% in the month of May with the biggest contribution coming from food and beverage and strong wage growth. The BoE will hike at least one more time in efforts to bring down inflation. Meanwhile NZ q/q GDP also printed – the result not pretty with the economy dropping into a recession with a print of -0.1% following -0.6% in the fourth quarter. Market analysts seem to be on the fence with the timing of rate hikes, many predicting cuts could happen as soon as late this year. The determining factor could be in wages data – if unemployment rises this could be the signal the RBNZ needs. Downside bias remains for the kiwi.

The current interbank midrate is: NZDGBP 0.4878 GBPNZD 2.0500
The interbank range this week has been: NZDGBP 0.4864- 0.4916 GBPNZD 2.0340- 2.0558

The Australian Dollar (AUD) has continued to push higher against the US Dollar (USD) into Friday sessions, the cross reaching 0.6880 a fresh late February 2023 high. Poor Chinese data hasn’t held back the AUD with Industrial Production, Retail Sales and House prices all releasing worse than predicted. Australian employment figures improved in May showing the unemployment dropped from 3.7% to 3.6% as participation grew 79,000. This doesn’t paint the picture the RBA has in mind for a slowing economy casting questions over probability of further hikes from the RBA. The RBA governor Lowe saying inflation pressures are rising and further tightening may be required. Recession fears in the US have eased with analysts left scratching heads over how the economy has been so resilient. The Fed leaving their rate unchanged at 5.25% yesterday while the door is still open for further tightening in July and maybe November.

The current interbank midrate is: AUDUSD 0.6884
The interbank range this week has been: AUDUSD 0.6726- 0.6892

Another big day in US equities took the New Zealand Dollar higher, extending the bull run from last week against the US Dollar (USD) to the 0.6230 zone. The New Zealand economy slipped into a technical recession with GDP results published yesterday for the 1st quarter at -0.1% adding to the fourth Q result of -0.6%. Two schools of thought suggest NZ could be either hiking by year end or conversely the RBNZ will hold until mid-2024. The job market holds the key in our minds, unemployment data is not published until 1st August, anything tight around current 3.40% showing persistence could ultimately force the hand of the RBNZ. Meanwhile the US Fed kept their interest rate on hold at 5.25% pausing as they said they would, ending a 10-run streak of hikes. The hawkish tone of inflation remains with expectations of further hikes in July and possibly November. Despite the run north by the kiwi over the past 2 weeks we still maintain our dovish view of the kiwi over the mid to long term.

The current interbank midrate is: NZDUSD 0.6237
The interbank range this week has been: NZDUSD 0.6104- 0.6242

The Australian Dollar (AUD) has done well over the week to hold ground around 0.5385 (1.8570) areas after a slew of poor data published in China. However, with wage growth figures up- the unemployment rate dropping from 3.7% to 3.6% this has cast doubt over forecasting that the economy is slowing with employment participation increasing over 79k in the month of May. We see further tightening in the coming months eventuating and the widening yield differentials pushing the cross into 0.5260 (1.9000) territory over the coming weeks.

The current interbank midrate is: AUDGBP 0.5381 GBPAUD 1.8583
The interbank range this week has been: AUDGBP 0.5347- 0.5406 GBPAUD 1.8497- 1.8699

New Zealand’s GDP came in softer than predicted, contracting -0.1% for the first quarter 2023 to go with the -0.6% in the fourth quarter of 2022 pushing the country into a formal recession. Recent weather and soaring interest rates have taken a toll on the consumer. Signs are the economy could be in for several poor quarters increasing the likelihood of the RBNZ cutting rates. At the moment the central bank are not predicted to start cutting until mid-2024, we expect this to be reviewed formally over the coming weeks. Aussie jobs data came in hot with the unemployment rate dropping from 3.7% to 3.6% suggesting the RBA could be eying up further tightening in the coming months. A close below the key support at 0.9000 (1.1110) over the next few days would give guidance for further weakness in the NZD.

The current interbank midrate is: NZDAUD 0.9062 AUDNZD 1.1030
The interbank range this week has been: NZDAUD 0.9052- 0.9148 AUDNZD 1.0931- 1.1047

A market shift in sentiment has taken the Australian Dollar (AUD) off recent lows around 0.6060 (1.6500) to 0.6275 (1.5930) this morning against the Euro (EUR) , a decent swing in a short amount of time. Comments from Villeroy around the slowdown in France’s inflation and soft data out in Italy have had the Euro on the backfoot. However, talk of higher interest rates should have the Euro well supported on dips. Looking ahead we have ECB’s interest rate and monetary policy out Friday with expectations of a hike from 3.75% to 4.00%- their 8th consecutive hike, in theory this should give the EUR a nudge. This comes as the European area slips into recession.

Current Level: 0.6273 (1.5941)
Resistance: 0.6290 (1.6150)
Support: 0.6190 (1.5900)
Last Weeks Range: 0.5638-0.5694 (1.7561-1.7734)

Positive risk sentiment and a hawkish RBA continue to push the Australian Dollar (AUD) off recent lows against the British Pound (GBP) Monday as it reached 0.5400 (1.8530). 10 days back the cross clocked 0.5215 (1.9180) so a reasonably big correction. UK wage growth continues to stay high, the lack of staff the big driver, suggesting the Bank of England (BoE) will hike rates further and any cuts will be later than first thought. On the calendar are Aussie job numbers Thursday with unemployment at 3.7% predicted to stand. We are expecting a little more momentum in the AUD this week.

Current Level: 0.5395 (1.8535)
Resistance: 0.5415 (1.9000)
Support: 0.5265 (1.8470)
Last Weeks Range: 0.4851-0.4903 (2.0393-2.0613)

The Australian Dollar (AUD) has extended gains Monday clocking 0.6770 a far cry from the early June low of 0.6460 as sentiment improves and equities rally. The Aussie has been the outstanding performer in June offsetting recent talk of higher chances of the Australian economy falling into a recession. A massive week of economic data is releasing over the next few days highlighted by Fed rate release and Australian Unemployment. With expectations of the Fed cutting rates in the 4th quarter this could undermine the greenback and bring in the Aussie carry trade into play. However, we don’t rule out 1 further hike in the next couple of months, the scales are still tipped to the downside for the pair.

Current Level: 0.6753
Resistance: 0.6810
Support: 0.6700
Last Weeks Range: 0.6575-0.6750

The New Zealand Dollar (NZD) has done well in the past few days of trading, clawing back recent losses to hit back at 0.57100 (1.7520) into Tuesday. The Euro came under selling pressures after France’s Villeroy commented about a slowdown in inflation and general risk sentiment improved. This week’s economic docket sees NZ quarterly GDP print Thursday before the ECB’s policy statement and interest rate release. The ECB will hike 25 points to 4.00% as the area faces inevitable recession. With the RBNZ suggesting no further rate hikes we could see the Euro make gains and retest 0.5610 (1.7830).

Current Level: 0.5685 (1.7590)
Resistance: 0.5720 (1.7830)
Support: 0.5610 (1.7480)
Last Weeks Range: 0.5638-0.5564 (1.7560-1.7736)