The Euro (EUR) has been better supported this week trading back to 1.6540 (0.6045) against the New Zealand Dollar (NZD) after falling to 1.6380 (0.6105) in early Monday trading. Pressure is on for the ECB to raise rates sooner rather than later with rocketing inflation in the region. Last week’s April’s inflation came in at 7.4% revised slightly lower than 7.5% but remains super high mainly due the ongoing energy crisis caused by the Russian invasion of Ukraine. German Producer prices printed at their highest level in years. The RBNZ will raise the cash rate tomorrow to 2.0% from 1.5%- largely already priced into the curve but it should give the kiwi a push post release. Technically the cross sits at the bottom of the fortnight channel with a bias to the upside, we predict 0.6135 (1.6300) to be retested.
Current Level: 0.6030 (1.6583)
Resistance: 0.6135 (1.6820)
Support: 0.5945 (1.6300)
Last Weeks Range: 0.5994-0.6076 (1.6456-1.6683)
Retail Sales in the UK for the month of April improved 1.4% compared to -0.3% predicted coming after a fall of 1.2% in March figures giving the British Pound (GBP) strength against the New Zealand Dollar to 0.5110 (1.9560), the cross ending the week around 0.5130 (1.9490). Inflation jumped to 9% in April the highest level since 1982 following surging prices in electricity and other fuels. This compared to 7% in March and is a real worry for consumers. The only thing the bank of England can do in response is raise interest rates, if we see inflation clock 10%, we could see interest rates go to 3.5% by the end of 2022. On the calendar this week we have key Reserve Bank of New Zealand data with the rate announcement and policy statement. The RBNZ is expected to raise the cash rate by 50 points to 2.0% making it the highest since September 2016. We expect the cross to retest the 3-week high at 0.5210 (1.9200) levels this week.
Current Level: 0.5119 (1.9535)
Resistance: 0.5175 (1.9620)
Support: 0.5095 (1.9320)
Last Weeks Range: 0.5083-0.5138 (1.9460-1.9671)
The New Zealand Dollar (NZD) inched its way higher over the course of last week against the Australian Dollar Dollar (AUD) to close at 0.9140 (1.0940). The kiwi still holds above key support at 0.9000 supported by better performing risk markets and prospects of the RBNZ raising rates. The RBNZ is widely predicted to raise the cash rate tomorrow from 1.5% to 2.0% to combat rising inflation, its second consecutive punch higher after raising in April. At 2.0% this will be the highest it’s been since September 2016. As inflation threatens to blow out of control the RBNZ will be carefully balancing rises with inflation forecasts with the ultimate goal of getting back to a “neutral policy” stance of 1-3% inflation target. The 2-year inflation expectation has risen recently to 3.29%. It’s a finely balanced algorithm, this “economy adjusting” – get it wrong and they could squeeze out growth and cause an economic recession. We don’t expect the cross to travel to far from the Roost this week.
Current Level: 0.9085 (1.0999)
Resistance: 0.9125 (1.1100)
Support: 0.9009 (1.0960)
Last Weeks Range: 0.9026-0.9100 (1.0988-1.1079)
Recession worries in the USA are at the front of conversation which led to a week of poor performance by the US Dollar (USD) over the past 7 days. The New Zealand Dollar (NZD) dominated moves Monday extending last week’s bull run from 0.6220 to reach a fresh high of 0.6490 before dropping into Tuesday to 0.6430. Risk conditions improved with equity markets and commodities mostly up. Odds are starting to improve for a global recession given massive inflation forecast and rate hikes to follow. Earning of late from retail giants Walmart and Target were down suggesting consumers have pulled back on discretionary items. The RBNZ will raise their cash rate tomorrow from 1.5% to 2.0% to combat rising inflation expected to be well over 7.0% at the July 17 read for the second quarter. For those buying USD don’t bank on the cross going higher in the medium to long term, to be honest current buy levels around 0.6400 look attractive.
Current Level: 0.6433
Last Weeks Range: 0.6230-0.6415
All Day, CAD, Bank Holiday
4:15am, GBP, BOE Gov Bailey Speaks
7:30PM, EUR, German Flash Manufacturing PMI
7:30PM, EUR, German Flash Services PMI
4:20AM, USD, Fed Chair Powell Speaks
2:00PM, NZD, Official Cash Rate
2:00PM, NZD, RBNZ Monetary Policy Statement
2:00PM, NZD, RBNZ Rate Statement
3:00PM, NZD, RBNZ Press Conference Read more
What a difference positive sentiment makes to market mood. The New Zealand Dollar (NZD) has pushed up from the weekly open of 0.6260 as risk products rose across the board. Positive US data and Shanghai restrictions have also boosted investor appetite with the cross clocking 0.6360 earlier today. US Retail Sales printed at 0.9% m/m for April slightly lower than the 1.0% predicted but a healthy upwardly revised March number from 0.5% to 1.4% highlighted improved consumer spending. This data suggests we should see decent growth in the second quarter sweeping aside earlier speak of recession risks. Industrial Production also published stronger at 1.1% in April vs 0.4%, the 4th straight monthly gain. The NZ annual Budget is tomorrow at 2pm NZT which doesn’t usually affect movement in the NZD much historically. On the chart, technically the pair is still trading in the bearish channel decline from the 0.7030 high posted in early April. A break above 0.6500 and the 30-day moving average would signal a trend change.
The current interbank midrate is: NZDUSD 0.6364
The interbank range this week has been: NZDUSD 0.6226- 0.6373
Equity markets continued to rally into Wednesday taking the Australian Dollar (AUD) higher against the US Dollar (USD) to 0.7020, this comes as in the wake of another sell off in fixed income. Chinese Retail Sales Monday took price lower to 0.6870 after figures showed a sharp decline of -11.1% vs -6.2%, consumer spending has been hit by recent covid lockdown restrictions. US Core Retail Sales printed at 0.9% m/m for April and March’s numbers were upwardly revised from 0.5% to 1.4% highlighting improved consumer spending trends. Minutes from the RBA meeting on the 3rd of May shows the RBA are more open to a 40-point rise to rates rather than the talked about 15 points move in its hawkish comments, but a 25 point move in the middle of an election campaign is the likeliest outcome with federal elections being held this weekend. We may also see a larger 40 point move at their July meeting. The test heading into the close of the week will be whether the AUD can hold off dropping through 0.7000 again. If we see further rises in risk products the currency should retest the fortnightly high at 0.7075, watch for tomorrow’s wage data which could boost the Aussie.
The current interbank midrate is: AUDUSD 0.7034
The interbank range this week has been: AUDUSD 0.6870- 0.7038
The New Zealand Dollar (NZD), Australian Dollar (AUD) cross continues to consolidate around the recent lows at 0.9050 (1.1050) areas with the Aussie slightly edging out the kiwi this week. The physiological 0.9000 big figure support should hold for a while longer. China’s iron ore demand is expected to surge once Chinese industry is back online post covid lockdowns which in turn could benefit the AUD over the next few months while a backlog of manufacturing orders are filled. Minutes from the RBA (3rd May) confirms the RBA is more open to a 40-point hike in rates over the talked about 15-point move, but a 25 point move in the midst of an election campaign is the likely scenario (6 June). Federal elections are being held this weekend with labour leading the polls. Aussie jobs data tomorrow and next week’s RBNZ rate announcement and statement is in view with the RBNZ expected to hike interest rates to 2.0% from 1.5%.
The current interbank midrate is: NZDAUD 0.9046 AUDNZD 1.1044
The interbank range this week has been: NZDAUD 0.9026- 0.9090 AUDNZD 1.1001- 1.1079
12AM, USD, FOMC Member Bullard Speaks
12:30AM, USD, Core Retail Sales m/m
12:30AM, USD, Retail Sales m/m
6AM, USD, Fed Chair Powell Speaks
6:30AM, USD, FOMC Member Mester Speaks
1:30PM, AUD, Wage Price Index q/q
6PM, GBP, CPI y/y
Tentative, EUR, ECB Financial Stability Review Read more