FX News

US markets were closed Monday for Memorial Day making for a slow day across currencies. We did get a little upside off the weekly open as risk improved after US debt ceiling negotiations concluded positively between Biden and McCarthy with an agreement of sorts. The US Dollar (USD) slipped as the Australian Dollar (AUD) improved to 0.6550 in thin trading conditions. US Manufacturing data prints Friday along with the ever-important US Non-Farm Payroll and unemployment rate. We expect another decent Non-Farm figure following 13 months of positive numbers. Every publication going back to early 2022 has sent the AUD higher post release. Something to keep in mind. On the chart we don’t see much support for the AUD as it heads into the abyss eying 0.6200.

Current Level: 0.6531
Resistance: 0.6800
Support: 0.6500
Last Weeks Range: 0.6489-0.6667

The New Zealand Dollar (NZD) fell from its 10-week high of 0.5825 (1.7170) mid last week to close at 0.5640 (1.7730) against the Euro (EUR). US debt ceiling news has been positive Monday after a deal was reached sending the greenback lower and risk currencies higher, the kiwi making small gains into Tuesday to 0.5660 (1.7660). Setbacks in the Euro have been well supported of late with decent data publishing. German prelim CPI releases tomorrow and is predicted to be around 0.2% after contracting -0.3% in the first quarter of 2023. With potentially no further hiking on the radar from the RBNZ we may see the NZD weaken further towards the yearly low at 0.5530 (1.8080)

Current Level: 0.5644 (1.7717)
Resistance: 0.5715 (1.8070)
Support: 0.5535 (1.7500)
Last Weeks Range: 0.5636-0.5826 (1.7163-1.7741)

The New Zealand Dollar (NZD) has found itself perilously close to the multi-year low of 0.4880 (2.0500) as we head into the week. Spanked last week by news that the RBNZ may have finished their tightening policy the news took the kiwi from 0.5040 (1.9850) to 0.4900 (2.0400) where it has managed to consolidate. Risk sentiment improved off the open as news that the US President had negotiated a new debt ceiling, the NZD making small gains into Tuesday as the greenback was sold. With the Bank of England setting up to hike rates again 25 points in June, August, and September we expect the Pound to continue to strengthen.

Current Level: 0.4895 (2.0429)
Resistance: 0.5060 (2.0520)
Support: 0.4875 (1.9770)
Last Weeks Range: 0.4894-0.5064 (1.9746-2.0431)

The Australian Dollar (AUD) extended gains Monday against the New Zealand Dollar (NZD) reaching 1.0800 (0.9260) as it targets the monthly high of 1.0835 (0.9230). Clearly the recent RBNZ stance to halt further hiking has had a detrimental effect on the currency putting it under severe pressure. Australian CPI for the month of April prints tomorrow on the docket, we expect this to be around 6.4% slightly higher than the March release. With price moving through the 100-day moving average this morning we could see more upside develop in the Aussie. However, the NZD carry trade still needs to be considered.

Current Level: 0.9256 (1.0800)
Resistance: 0.9470 (1.0900)
Support: 0.9174 (1.0560)
Last Weeks Range: 0.9273-0.9471 (1.0558-1.0783)

The New Zealand Dollar (NZD) has fallen to its lowest level since November 2022 after a slump post last week’s RBNZ policy announcement. The kiwi traded down to 0.6032 late last week and sits around 0.6055 this morning. The RBNZ has paused its hiking schedule after raising rates to 5.50%, a 14-year high. Word is it should stay here until mid-2024. We are not sold on the idea of the kiwi entering a downward spiral in the coming months- moves to the topside would represent the positive “carry trade” scenario against the USD. After all, it’s the only mainstream currency which has a higher interest rate than the US at 5.25%. Let’s see what happens. Certainly, with the US debt ceiling negotiations between Biden and McCarthy being agreed this has boosted risk appetite, but not as much as would have thought, making the kiwi undervalued. Later in the week we have US Non-Farm Payroll and the Unemployment rate publishing.

Current Level: 0.6046
Resistance: 0.6360
Support: 0.6000
Last Weeks Range: 0.6032-0.6301

Market Overview

Key Points:

• US Debt ceiling negotiations have been reached. US House speaker McCarthy and President Biden have come to an agreement to raise the debt ceiling of 31.4Tn until January 2025 allowing the US government to not default on its debt obligations. It’s said that the capital raising exercise will trim 0.1% off next year’s GDP.
• Predictions are for the RBA to hold interest rates at the June 4th meeting while a hike at the 4 July meeting looks favourable.
• Federal Reserve rate forecasts for June look to be a close call. The Fed needs 3 items to consider hiking- strong economic data releases, debt ceiling increase (check) and a softening in the regional bank stress.
• ECB’s Makhlouf says upward pressures on inflation have slowed but food prices are still rising leading to his opinion that hikes are needed in June and July. He believes the Eurozone can achieve its inflation target without dropping into a recession.
• Chinese Industrials fell 18.2% y/y in April following a 19.2% dip in March.
• Geopolitical tensions between Japan and North Korea increase.
• The US Dollar (USD) has been the best performer in the month of May compared to the Japanese Yen (JPY) , the worst performer. Read more

Monday May 29
All Day GBP Bank Holiday
All Day EUR French Bank Holiday
All Day EUR German Bank Holiday

Tuesday May 30
All Day USD Bank Holiday
7:00pm EUR Spanish Flash CPI y/y
Forecast: 3.50%
Previous: 4.10%

Wednesday May 31
2:00am USD CB Consumer Confidence
Forecast: 99.1
Previous: 101.3
11:00am AUD RBA Gov Lowe Speaks
1:30pm AUD CPI y/y
Forecast: 6.40%
Previous: 6.30%
1:30pm CNY Manufacturing PMI
Forecast: 49.5
Previous: 49.2
1:30pm CNY Non-Manufacturing PMI
Forecast: 54.9
Previous: 56.4
All Day EUR German Prelim CPI m/m
Forecast: 0.20%
Previous: 0.40%
8:00pm EUR ECB Financial Stability Review Read more

The Australian Dollar has retreated over the week to the 0.6500 level against the US Dollar (USD) from the weekly open at 0.6650. Easing metal prices and a struggling RMB have contributed to an underperforming Aussie, the pair now sitting at the lowest level since November 2022. Second estimate US GDP for the first quarter 2023 came in at 1.3% revised up from the first estimate, the slowdown attributed to the Fed’s tightening policy. Despite the threat of recession for the economy we expect the Fed to hike just one more time next month with markets pricing in chances at 70% for a hike at the June meeting. US Debt ceiling negotiations are still ongoing to try and raise the ceiling on the 31.4Tn to avoid a disastrous default as early as 1 June. We may see further downside momentum over the coming days.

The current interbank midrate is: AUDUSD 0.6498
The interbank range this week has been: AUDUSD 0.6495- 0.6667

The New Zealand Dollar (NZD) hasn’t been able to hold around the (0.5030) 1.9870 area massacred after the RBNZ release Wednesday. Price dipped sharply as the RBNZ hiked the cash rate 25 points. This was largely priced into the curve but with Governor Orr suggesting there would be no more tightening needed in this cycle and inflation is now under control the kiwi dropped over a cent to settle around 0.4920 (2.0320). Future rate moves in the UK will depend on developing inflation for the Bank of England. Inflation year on year came in at a hefty 8.7% Wednesday much higher than forecast raising forecasts for the central bank to keep hiking. The bank could end up hiking another 25 points in June then again in August and September. The bank said, “we expect inflation to exceed forecast modestly”. They will no doubt keep hiking in order to return inflation to its target band. The chance of a recession is now much more likely. It’s a light calendar next week for the cross, we may struggle to break past (0.4900) 2.0400 support.

The current interbank midrate is: NZDGBP 0.4914 GBPNZD 2.0350
The interbank range this week has been: NZDGBP 0.4902- 0.5065 GBPNZD 1.9744- 2.0396

The New Zealand Dollar (NZD) has been the weakest currency this week, falling to the 0.6050 level against the US Dollar (USD) into Friday over 2 cents since Mondays open. A 25-point hike by the Reserve Bank of New Zealand to 5.50% would usually be positive for the currency, but not on this occasion with most of the announcement already priced into the chart. Governor Orr’s comments suggesting higher rates are needed to combat inflation so that consumer inflation returns to its target range. It was noted that higher interest rates were having a negative impact on the economy and consumer wallets. It was also noted that annual budget spending and recovery funding for Cyclone Gabrielle could cost the economy over 14B and add to further inflation woes. US debt ceiling negotiations and a lack of a result pushed investors into the safe haven greenback adding to the kiwi slump. Fundamentally and technically the kiwi’s momentum is to the downside with support now at 0.6000 then 0.5550 the October 2022 low.

The current interbank midrate is: NZDUSD 0.6054
The interbank range this week has been: NZDUSD 0.6042- 0.6301