FX News

The latest round of Australian data of late has impressed markets and improved the Aussie of recent lows. Unemployment data showed a rise in new people entering the workforce and a dip to the unemployment rate now 3.5% vs 3.6% predicted. The upbeat release sent the Aussie higher to 1.0800 (0.9260) and extended these gains into Monday to 1.0850 (0.9215). NZ Manufacturing data wasn’t so pretty with the sector struggling with a decline in production in March putting the kiwi under pressure. Down from February’s number and well below the long-term average of 53.0 . To put this into perspective this is the lowest read since NZ was put into lockdown in August 2021. NZ quarterly CPI releases Thursday and is predicted to remain stubbornly high around 7.2%.

Current Level: 0.9230 (1.0824)
Resistance: 0.9275 (1.0870)
Support: 0.9200 (1.0780)
Last Weeks Range: 0.9250-0.9430 (1.0604-1.0810)

The Federal Reserve has turned a corner in their fight against inflation with the latest release confirming a trend in the right direction is in play as CPI prints at 5.0% y/y in March the lowest level since May 2021. The US Dollar (USD) rallied into the weekly close against the New Zealand Dollar (NZD) to 0.6200 coming off 0.6300 midweek. The Fed will most likely hike rates at their May meeting and again in June before starting to vigorously cut rates prior to year-end. NY’s Fed business condition index spiked in April, a gauge of manufacturing activity, the first rise in 5 months indicating improved conditions. It should be a reasonably quiet week with just Fed members Waller and Harker speaking Friday. Those clients buying USD should consider at current levels.

Current Level: 0.6185
Resistance: 0.6350
Support: 0.6100
Last Weeks Range: 0.6181-0.6314

Market Overview

• US equities rally into the close trading back to recent highs
• Fed’s Barkin said he needs inflation to settle back to its 2-3% target before rate rises are paused.
• Lagarde on the wires saying once the inflation objective has been achieved we can discuss changing the 2.0% inflation target.
• The International Monetary Fund sees growth at 2.8% in 2023 and 3.0% for 2024, this is down slightly on January’s forecast. Global growth is seen at 3.0% in 2028, this is the worst mid-term forecast since 1990.
• SpaceX Starship launch has been delayed because of a valve freezing issue. No reschedule of the launch has been set.
• China’s defence minister Li Shangfu has again confirmed his support to Russia in its invasion of Ukraine. China is willing to help strengthen military efforts with Russia.
• NY State Manufacturing rebounded in April- the Index printing 10.8 compared to -17.7, a good barometer of economic growth.
• Housing demand in the US rises for the fourth straight month in April.
• The Australian Dollar (AUD) was the strongest currency last week with the New Zealand Dollar (NZD) and the Japanese Yen (JPY) the weakest. Read more

Tuesday April 18
12:30am USD Empire State Manufacturing Index
Forecast: -17.7
Previous: -24.6
3:00am EUR ECB President Lagarde Speaks
1:30pm AUD Monetary Policy Meeting Minutes
2:00pm CNY GDP q/y
Forecast: 3.90%
Previous: 2.90%
6:00pm GBP Claimant Count Change
Forecast: 10.2K
Previous: -11.2K
6:00pm GBP Average Earnings Index 3m/y
Forecast: 5.10%
Previous: 5.70%
9:00pm EUR German ZEW Economic Sentiment
Forecast: 15.5
Previous: 13 Read more

The Australian Dollar (AUD) came off 1.0610 (0.9425) late last week to rally back to 1.0775 (0.9280) this morning. Weirdly upside moves in the New Zealand Dollar (NZD) post a 50-point hike by the RBNZ came to a screaming Halt. Investors preferring to buy the AUD with commodities and precious metal prices strengthening. Adding to the confusion has been talk by the RBA suggesting decent odds of a cut to rates by the end of the year. Australian jobs numbers print later today with all eyes on the data and how this may affect the RBA’s recent mood to pause tightening plans. Of note Australian consumer confidence reached its highest level since June 2022 and China and Australia have reached a deal which will possibly see tariffs removed on exports of barley implemented in 2020. On the chart we see price pushing above the 100-day moving average line suggesting further upside for the AUD may continue.

The current interbank midrate is: NZDAUD 0.9278 AUDNZD 1.0771
The interbank range this week has been: NZDAUD 0.9259- 0.9407 AUDNZD 1.0630- 1.0800

Bank of England’s Bailey was on the wires early this morning talking about UK banking stability saying he doesn’t see a repeat of the 2008 financial crisis. Balance sheets will remain larger than pre-crisis for financial stability reasons, he went on to suggest. The Pound (GBP) pushed higher off 0.5020 (1.9930) post his speech climbing to 0.4995 (2.0010) an October 2022 level. Markets await UK GDP m/m out tonight for February predicted to come in at 0.1%. The cross looks to be targeting 0.4965 (2.0135) the early 2022 low. Through here and we are deep into long term ranges.

The current interbank midrate is: NZDGBP 0.4970 GBPNZD 2.0120
The interbank range this week has been: NZDGBP 0.4970- 0.5044 GBPNZD 1.9825- 2.012

The English Pound (GBP) extended gains over the Australian Dollar (AUD) this week reaching 1.8660 (0.5359) in early morning trading. The 9th from the last 10 weeks the GBP has outperformed the Aussie. Bank of England’s Bailey confirmed last night that the UK banking sector was sound, saying he doesn’t see another 2008 financial crisis eventuating based on bank reforms enacted post the 2008 crisis, being well capitalised has been a big part of this. UK monthly GDP prints tonight and is expected to post around 0.1% for the month of February. We may see further upside in the GBP develop into the weekly close. Massive support at 0.5220 (1.9150) on the chart, below here and we are hitting multi year lows.

The current interbank midrate is: AUDGBP 0.5357 GBPAUD 1.8667
The interbank range this week has been: AUDGBP 0.5347- 0.5395 GBPAUD 1.8535- 1.8700

The Australian Dollar (AUD) shot up early this morning post the Fed inflation read, posting 0.6720 against the US Dollar (USD) despite US equity markets falling. US inflation for March came in at 0.1%, moving the y/y figure from 5.1% to 5.0% meeting expectations. Fed minutes from the last meeting in late March released overnight highlighting just how unstable and uncertain markets are. Recent turmoil in the recent bank closures have increased the chances of the Fed continuing with their tightening policy. The Fed will closely monitor data action ahead of the May 3rd meeting. At the moment we expect a 25-point hike. With Aussie unemployment data and later US Retail Sales to print we may see price shifts into the weekly close. Overall, the Aussie remains heavy.

The current interbank midrate is: AUDUSD 0.6691
The interbank range this week has been: AUDUSD 0.6618- 0.6722

US Inflation cooled to its lowest level in two years in March to 5.0% y/y sending stocks lower and the kiwi unexpectedly higher to 0.6240. Inflation remains far higher than the Fed would care to admit targeting 2.0% leaving us to speculate as to whether the central bank will raise rates at the May 3rd meeting. We suspect so by 25 points which should give the greenback some fundamental upside over the remainder of April trading. Expectations are for the Fed to have started aggressively cutting rates by the end of the year. Lower US yields should push equity markets higher and therefore the NZD should go along for the ride. Downside bias in the kiwi may gather momentum in the long run.

The current interbank midrate is: NZDUSD 0.6207
The interbank range this week has been: NZDUSD 0.6180- 0.6251

Key Points:

• The International Monetary Fund sees growth at 2.8% in 2023 and 3.0% for 2024, this is down slightly on January’s forecast. Global growth is seen at 3.0% in 2028, this is the worst mid-term forecast since 1990.
• North Korea have launched another ballistic missile towards the Sea of Japan 
• Post US CPI release Goldman Sachs doesn’t expect a hike in May but nothing at the June meeting, previously they had forecast rises at both meetings.
• ECB’s Villeroy says they have a long way to go hiking rates with a 50-point hike in May forecast. 
• Bank of Canada holds their cash rate at 4.50% as widely expected.
• Fed warns of recession chances last in 2023.
• Ukraine has launched an investigation over a gruesome video showing a  Ukraine soldier being beheaded. 
• The Euro (EUR) has been the strongest currency in April thus far with the New Zealand Dollar (NZD) the weakest.