FX News

Key Points:

Fed’s Powell came out hawkish at this morning’s Federal Reserve policy meeting with the greenback broadly rallying off the back of his statement. Markets have since called his bluff with the big dollar back at pre-Fed levels.
Airlines around the world are reporting softer demand post covid opening as consumers consider personal spending
A German recession is now predicted to be milder than expected
Forecast modelling in China suggest economic growth in 2023 is not going to be as bad as initially predicted
The RBA should hike interest rates by 25 points at each of the next two meetings, their next release is 7 February Read more

Monday 12/12
8pm, GBP, GDP m/m
Forecast: 0.40%
Previous: -0.60%

Tuesday 13/12
9:25am, CAD, BOC Gov Bailey Speaks
2:30am, GBP, Claimant Count Change
Forecast: 3.5K
Previous: 3.3K

Wednesday 14/12
12am, GBP, BOE Gov Bailey Speaks
2:30am, USD, CPI m/m
Forecast: 0.30%
Previous: 0.40%
2:30am, USD, CPI y/y
Forecast: 7.30%
Previous: 7.70%
2:30am, USD, Core CPI m/m
Forecast: 0.30%
Previous: 0.30%
11:30am, AUD, RBA Gov Lowe Speaks
8pm, GBP, CPI y/y
Forecast: 10.90%
Previous: 11.10% Read more

The RBA raised their cash rate 25 points Tuesday to 3.25% from 2.85%. A hawkish RBA tone sent the Australian Dollar (AUD) lower off the news against the Euro to 0.6380 (1.5680) then to 0.6360 (1.5730) into Wednesday a February 2022 low as more “carry traders” departed. Price down here didn’t hold, the Aussie clawing back losses to 0.6420 (1.5620) on this morning’s open.. Growth for the third quarter came in at a reasonable 0.6% not quite the 0.7% markets were predicting as the annual number dropped from 6.2% to 5.9%. Forecasts have growth predicted to slow over the coming 18 months. Further downside for the Aussie is on the cards leading into Christmas.

Current Level: 0.6397 (1.5632)
Resistance: 0.6560 (1.6200)
Support: 0.6170 (1.5240)
Last Weeks Range: 0.6391-0.6567 (1.5227-.5645)

The Australian Dollar (AUD) is still one of the worst performing currencies. Tuesday’s RBA cash rate announcement was underwhelming, with Governor Lowe increasing the rate 25 points from 2.85% to 3.10% as predicted, against the British Pound (GBP) it was relatively unmoved post release. Comments from the central bank suggested there are still upside risks to inflation, expected to hit 8.0% by the end of the year. Third quarter growth printed at 0.6% down from 0.7% expected but healthy enough with spending still on the rise despite weaker commodity prices such as iron ore resulting in declines. The less attractive AUD has seen price push through long term support at 0.5525 (1.8100) levels to 0.5480 (1.8250) this morning the lowest since February this year. We expect to see more of the same.

Current Level: 0.5508 (1.8155)
Resistance: 0.5635 (1.8450)
Support: 0.5420 (1.7750)
Last Weeks Range: 0.5527-0.5649 (1.7702-1.8091)

The Australian Dollar (AUD) has given back last week’s gains against the US Dollar (USD) reversing out from fresh highs around 0.6850 to 0.6770 this morning. Risk conditions have not been ideal with equity markets all coming off in December. US bond yields have also tracked lower with US third quarter labour costs rising 5.3% from a year ago with productivity declining 1.3% y/y. The RBA hiked rates just 25 points to 3.1% Tuesday as predicted with Governor Lowe suggesting further inflationary pressures are in store over the coming months. Third quarter growth came in at 0.6% down from expectations of 0.7% highlighting scary prospects that inflation could track much higher and push the cash rate above the 3.85% top expected. Recent momentum could carry the cross to 0.7000 by Christmas.

Current Level: 0.6727
Resistance: 0.6900
Support: 0.6600
Last Weeks Range: 0.6638-0.6844

The risk off tone Monday with recession fears back in conversation led to the New Zealand Dollar (NZD) dropping to 0.6000 (1.6650) against the Euro (EUR). Over the past couple of days, the pair has mildly lifted to 0.6060 (1.6500) areas as commodities recovered early week losses. The kiwi should keep the upper hand as we head into the Christmas/new year period with the recent hawkish learning RBNZ tone and highest cash rate in the developed world offering good NZD returns to investors. ECB’s Lagarde speaks Friday the key standout.

Current Level: 0.6041 (1.6553)
Resistance: 0.6100 (1.6840)
Support: 0.5940 (1.6400)
Last Weeks Range: 0.5937-0.6102 (1.6388-1.6843)

The New Zealand Dollar (NZD) travelled out of its broad range late last week against the British Pound (GBP) reaching 1.9080 before falling back Monday to 0.5170 (1.9350) in risk off conditions. UK constructions PMIs weighed down the Pound despite a decent read in BRC Retail Sales. The economic docket is again thin this week with very little data upcoming to consider. Direction looks to be kiwi favoured with recent momentum still shaping flow. Certainly, the recent RBNZ hike should reflect this. A retest of 0.5305 (1.8850) over the coming days/weeks looks a chance.

Current Level: 0.5201 (1.9227)
Resistance: 0.5245 (1.9450)
Support: 0.5140 (1.9070)
Last Weeks Range: 0.5141-0.5241 (1.9080-1.9450)

The Australian Dollar (AUD) continues to slide lower across the board, against the New Zealand Dollar (NZD) we have seen it clock 0.9495 (1.0530) this week post the RBA release Wednesday a new 2022 high. However, a move through 0.9500 wasn’t to be in morning trade with the cross back at 0.9450 (1.0580). Recent RBA action saw the central bank increase their cash rate 25 points to 3.25% with a hawkish leaning undertone but recent data including this week’s Australian quarterly growth +0.6% vs +0.7% reflects the view inflation and cash rates are far from anticipated peaks. Next week we have NZ q/q GDP and Australian unemployment. We expect the kiwi to remain well supported into Christmas.

Current Level: 0.9440 (1.0585)
Resistance: 0.9710 (1.0900)
Support: 0.9175 (1.0300)
Last Weeks Range: 0.9244-0.9454 (1.0577-1.0817)

The New Zealand Dollar reached a brand-new high Monday of 0.6440 against the US Dollar (USD) the highest level since mid-August as it continues its momentum higher from early October lows around 0.5500. US manufacturing prices have eased considerably over the past few months leading to indications of further recession pressures with the greenback sliding. Third quarter labour productivity came in lower at 5.3% y/y instead of prior forecast at 6.1% lowering bond yields. Looking ahead we have US consumer sentiment and University of Michigan inflation expectations, a closely watched market health indicator. With the cash rate at 4.25% offering investors a good return,  we expect the kiwi to track higher through into 2023.

Current Level: 0.6352
Resistance: 0.6550
Support: 0.6200
Last Weeks Range: 0.6151-0.6409

Market Overview

Key Points:

• Fonterra has revised down its milk solid price from $8.50 – $10.00 to $8.50 – $9.50
• US Recession fears ramp up
• Bank of Canada hikes 50 points overnight amid a dovish read
• China relaxes covid rules moving away from their zero covid policy for the first time, those with asymptomatic with mild symptoms can so home quarantine
• The RBI (Reserve Bank of India) hikes interest rate 35 points to 6.25%, the fifth time in 2022 the central bank has hiked. The RBI saying growth is still very strong at a time when the rest of the world is slow down
• Eurozone third quarter GDP +0.3% vs +0.2% q/q estimate
• A sharp economic downturn in Australia in 2023 is rapidly coming into play with GDP supporting prospects of higher inflation leading to higher interest rates
• The British Pound (GBP) has been the strongest currency in the month of December so far with the Canadian Dollar (CAD) the weakest performer. Read more